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StudioBuzz.com LLC Agreement 03-28-2000

LIMITED LIABILITY COMPANY AGREEMENT

 

 

OF

 

 

STUDIOBUZZ.COM, LLC

 

 

A DELAWARE LIMITED LIABILITY COMPANY

 

 

 

 

 

 

 

THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE

SECURITIES ACT OF 1933 NOR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES

LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,

TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER

APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF

COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT

REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS AGREEMENT IS

FURTHER SUBJECT TO OTHER RESTRICTIONS, THE TERMS AND CONDITIONS OF WHICH ARE SET

FORTH IN THIS AGREEMENT.

 

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TABLE OF CONTENTS

 

 

 

PAGE

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ARTICLE I DEFINITIONS..............................................................................1

1.1 "Act".........................................................................................1

1.2 "Adjusted Capital Account"....................................................................2

1.3 "Adjusted Capital Contribution"...............................................................2

1.4 "Affiliate"...................................................................................2

1.5 "Agreement"...................................................................................2

1.6 "Affected Interest"...........................................................................2

1.7 "Bankruptcy"..................................................................................2

1.8 "Bona Fide Offer".............................................................................2

1.9 "Capital Account".............................................................................2

1.10 "Capital Contribution"........................................................................3

1.11 "Certificate of Formation"....................................................................3

1.12 "Closing".....................................................................................3

1.13 "Code"........................................................................................3

1.14 "Company".....................................................................................3

1.15 "Company Minimum Gain"........................................................................3

1.16 "Confidential Information"....................................................................3

1.17 "Contribution Cap"............................................................................4

1.18 "Distributable Cash"..........................................................................4

1.19 "Distribution"................................................................................4

1.20 "Economic Interest"...........................................................................4

1.21 "Economic Interest Holder"....................................................................4

1.22 "Economic Risk of Loss".......................................................................4

1.23 "Eligible Members"............................................................................4

1.24 "Fair Market Value"...........................................................................4

1.25 "Fiscal Year".................................................................................4

1.26 "Former Member"...............................................................................5

1.27 "Former Member's Interest"....................................................................5

1.28 "Interest Holder".............................................................................5

1.29 "Joint Designee"..............................................................................5

1.30 "Majority in Interest"........................................................................5

1.31 "Managers"....................................................................................5

1.32 "MediaChase"..................................................................................5

1.33 "MediaChase Consulting Agreement".............................................................5

1.34 "Member"......................................................................................5

1.35 "Member Minimum Gain".........................................................................5

1.36 "Member Nonrecourse Debt".....................................................................5

1.37 "Member Nonrecourse Deductions"...............................................................5

1.38 "Membership Interest".........................................................................5

1.39 "Membership Termination Event"................................................................6

1.40 "Net Profits"and "Net Losses".................................................................6

1.41 "Noncompete Date".............................................................................6

1.42 "Nonrecourse Deductions"......................................................................6

1.43 "Nonrecourse Liability".......................................................................6

 

 

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1.44 "Notice"......................................................................................6

1.45 "Offered Interest"............................................................................6

1.46 "Onlinefilmsales".............................................................................6

1.47 "Person"......................................................................................6

1.48 "Preferred Return"............................................................................6

1.49 "Preferred Return Account"....................................................................7

1.50 "Securities Act"..............................................................................7

1.51 "Tax Credits".................................................................................7

1.52 "Tax Matters Partner".........................................................................7

1.53 "Transfer"....................................................................................7

1.54 "Treasury Regulations"........................................................................7

1.55 "United States Bankruptcy Code"...............................................................7

1.56 "Unpaid Preferred Return".....................................................................7

1.57 "Voting Interest".............................................................................7

 

ARTICLE II ORGANIZATIONAL MATTERS...................................................................8

2.1 Name..........................................................................................8

2.2 Term..........................................................................................8

2.3 Office and Agent..............................................................................8

2.4 Purpose of Company............................................................................8

2.5 Intent........................................................................................8

2.6 Members.......................................................................................8

2.7 Formation Expenses............................................................................8

 

ARTICLE III CAPITAL CONTRIBUTIONS....................................................................9

3.1 Initial Capital Contributions.................................................................9

3.2 Additional Capital Contributions..............................................................9

(a) Additional Contributions by Onlinefilmsales..............................................9

(b) Additional Capital.......................................................................9

3.3 Capital Accounts..............................................................................9

3.4 No Withdrawals of Capital.....................................................................9

3.5 Loans; No Compensation........................................................................9

 

ARTICLE IV MEMBERS..................................................................................9

4.1 Admission of Additional Members...............................................................9

4.2 Withdrawals or Resignations..................................................................10

4.3 Members Are Not Agents.......................................................................10

4.4 Meetings of Members; Written Consent.........................................................10

 

ARTICLE V MANAGEMENT AND CONTROL OF THE COMPANY...................................................10

5.1 Management of the Company by the Managers....................................................10

(a) Exclusive Management by the Managers....................................................10

(b) Powers of the Managers..................................................................11

(c) Agency Authority of the Managers; Delegation by the Managers............................12

(d) Discretion of the Managers..............................................................12

 

 

 

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(e) Performance of Duties; Liability of Managers............................................12

(f) Devotion of Time........................................................................12

(g) Decisions of the Managers...............................................................12

(h) Meetings of Managers....................................................................13

5.2 Election of Managers.........................................................................13

(a) Number and Term.........................................................................13

(b) Vacancies...............................................................................13

5.3 Limitations on Power of the Managers.........................................................13

5.4 Members Have No Managerial Authority.........................................................14

5.5 Transactions between the Company and the Managers, the Members or their Affiliates...........14

(a) Contracts with Affiliates...............................................................14

(b) Contracts with Managers or Affiliates of the Managers...................................15

(c) Treatment of Affiliate Loans and Fees...................................................15

5.6 Officers.....................................................................................15

(a) Appointment of Officers.................................................................15

(b) Signing Authority of Officers...........................................................15

(c) Acts of Officers as Conclusive Evidence of Authority....................................15

5.7 Competing Activities.........................................................................16

5.8 Payments to Managers and Others..............................................................16

5.9 Expenses.....................................................................................16

 

ARTICLE VI ALLOCATIONS OF NET PROFITS, NET LOSSES AND DISTRIBUTIONS................................17

6.1 Minimum Gain Chargeback......................................................................17

6.2 Member Minimum Gain Chargeback...............................................................17

6.3 Qualified Income Offset......................................................................17

6.4 Nonrecourse Deductions.......................................................................17

6.5 Member Nonrecourse Deductions................................................................17

6.6 Allocation of Net Profits....................................................................17

6.7 Allocation of Net Losses.....................................................................18

6.8 Distributions by the Company.................................................................18

6.9 Allocation of Net Profits and Losses and Distributions in Respect of a Transferred

Interest.....................................................................................18

6.10 Tax Allocation Matters.......................................................................18

(a) Contributed or Revalued Property........................................................18

(b) Recapture Items.........................................................................19

6.11 Order of Application.........................................................................19

6.12 Allocation of Liabilities....................................................................19

6.13 Form of Distribution.........................................................................19

 

ARTICLE VII TRANSFER OF INTERESTS...................................................................20

7.1 Transfer of Interests........................................................................20

7.2 [intentionally omitted]......................................................................20

7.3 Right of First Refusal.......................................................................20

7.4 [intentionally omitted]......................................................................21

 

 

 

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7.5 [intentionally omitted]......................................................................21

7.6 [intentionally omitted]......................................................................21

7.7 Repurchase Restrictions Imposed by Law.......................................................21

7.8 Further Restrictions on Transfer of Interests................................................21

7.9 Substitution of Members......................................................................21

7.10 Enforcement..................................................................................22

7.11 Effect of Transfers in Violation of Agreement................................................22

 

ARTICLE VIII CONSEQUENCES OF MEMBERSHIP TERMINATION EVENTS...........................................22

8.1 Dissolution of Company.......................................................................22

8.2 Admission or Conversion......................................................................22

8.3 Terms of Transfer............................................................................23

(a) Transferee Bound by Agreement...........................................................23

(b) Notice of Repurchase Event..............................................................23

(c) Option to Purchase......................................................................23

(d) Purchase Price..........................................................................24

(e) Payment of Purchase Price...............................................................24

(f) Consummation of Sale....................................................................25

 

ARTICLE IX ACCOUNTING, RECORDS, REPORTING BY MEMBERS...............................................25

9.1 Books and Records............................................................................25

9.2 Reports; Annual Statements...................................................................26

(a) Governmental Reports....................................................................26

(b) Financial Reports.......................................................................26

(c) Tax Reports.............................................................................27

9.3 Bank Accounts; Invested Funds................................................................27

9.4 Tax Matters for the Company Handled by Tax Matters Partner...................................27

9.5 Accounting Matters...........................................................................27

9.6 Confidentiality..............................................................................27

 

ARTICLE X DISSOLUTION AND WINDING UP..............................................................28

10.1 Dissolution..................................................................................28

10.2 Date of Dissolution..........................................................................28

10.3 Winding Up...................................................................................28

10.4 Liquidating Distributions to Economic Interest Holders.......................................29

10.5 Distributions in Kind........................................................................29

10.6 Provision for Debts and Liabilities..........................................................29

10.7 No Liability.................................................................................29

10.8 Limitations on Payments Made in Dissolution..................................................29

10.9 Certificate of Cancellation..................................................................30

10.10 Compensation for Services....................................................................30

 

ARTICLE XI LIMITATION OF LIABILITY; STANDARD OF CARE; INDEMNIFICATION..............................30

11.1 Limitation of Liability......................................................................30

 

 

 

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Page(s)

11.2 Standard of Care.............................................................................30

11.3 Indemnification..............................................................................30

11.4 Contract Right; Expenses.....................................................................31

11.5 Indemnification of Employees and Agents......................................................31

11.6 Nonexclusive Right...........................................................................31

11.7 Severability.................................................................................31

11.8 Insurance....................................................................................31

 

ARTICLE XII REPRESENTATIONS OF THE MEMBERS..........................................................31

12.1 Preexisting Relationship or Experience.......................................................32

12.2 Access to Information........................................................................32

12.3 Economic Risk................................................................................32

12.4 Investment Intent............................................................................32

12.5 Consultation with Attorney...................................................................32

12.6 Purpose of Entity............................................................................32

12.7 Residency....................................................................................32

12.8 No Advertising...............................................................................32

12.9 Membership Interest is Restricted Security...................................................32

12.10 No Registration of Membership Interest.......................................................33

12.11 Organization.................................................................................33

12.12 Authority....................................................................................33

12.13 Enforceability...............................................................................33

12.14 No Violation.................................................................................33

 

ARTICLE XIII MISCELLANEOUS...........................................................................33

13.1 Legal Counsel................................................................................33

13.2 Amendments...................................................................................34

13.3 Offset Privilege.............................................................................34

13.4 Arbitration..................................................................................34

(a) General.................................................................................34

(b) Governing Law...........................................................................34

(c) Costs of Arbitration....................................................................34

13.5 Remedies Cumulative..........................................................................34

13.6 Notices......................................................................................34

13.7 Attorneys'Fees...............................................................................35

13.8 Governing Law; Jurisdiction..................................................................35

13.9 Complete Agreement...........................................................................35

13.10 No Third-Party Rights........................................................................35

13.11 Binding Effect...............................................................................35

13.12 Section Headings.............................................................................36

13.13 Interpretation...............................................................................36

13.14 Severability.................................................................................36

13.15 Multiple Counterparts........................................................................36

 

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LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

STUDIOBUZZ.COM, LLC

 

A DELAWARE LIMITED LIABILITY COMPANY

 

 

This Limited Liability Company Agreement is made as of March 28, 2000,

by and between Onlinefilmsales.com, LLC, a Delaware limited liability company

("Onlinefilmsales"), and MediaChase Ltd., a Delaware corporation ("MediaChase"),

with reference to the following facts:

 

A. StudioBuzz.com, LLC (the "Company") was formed on March 17, 2000,

as a limited liability company under the laws of the State of Delaware by

filing a Certificate of Formation for the Company with the Delaware Secretary

of State.

 

B. MediaChase heretofore contributed to the capital of the Company, all

of its right, title and interest in and to any assets of MediaChase used solely

in connection with the operation of the business entitled "StudioBuzz.com"

(collectively, the "StudioBuzz Assets") in consideration of the issuance by the

Company to MediaChase of a one hundred percent (100%) Membership Interest in the

Company.

 

C. Concurrently herewith, MediaChase is contributing to

Onlinefilmsales, a fifty percent (50%) Economic Interest and a 100% Voting

Interest in the Company, in consideration of (i) the issuance by Onlinefilmsales

to MediaChase of an interest in Onlinefilmsales (as more fully described in that

certain Limited Liability Company Agreement of Onlinefilmsales.com, LLC, of even

date herewith), and (ii) the agreement by Onlinefilmsales herein to make

additional contributions to the capital of the Company upon the satisfaction of

certain conditions stated.

 

D. The parties now desire to adopt a limited liability company

agreement to govern their respective rights and obligations as Members of the

Company.

 

NOW, THEREFORE, in consideration of the mutual covenants contained

herein and for other good and valuable consideration, the receipt of which is

acknowledged, the parties agree that the following shall be the Limited

Liability Company Agreement of the Company.

 

ARTICLE I

DEFINITIONS

 

When used in this Agreement, the following terms have the following

meanings:

 

1.1 "ACT" means the Limited Liability Company Act of the State of

Delaware.

 

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1.2 "ADJUSTED CAPITAL ACCOUNT" of an Economic Interest Holder means the

Capital Account of that Economic Interest Holder increased by the Economic

Interest Holder's share of Company Minimum Gain and Member Minimum Gain.

 

1.3 "ADJUSTED CAPITAL CONTRIBUTION" of an Economic Interest Holder means

the excess of (a) that Economic Interest Holder's Capital Contributions to the

Company, over (b) Distributions to that Economic Interest Holder that are a

return of Capital Contributions under Section 6.8(b).

 

1.4 "AFFILIATE" of a Member or Manager means (a) a Person directly or

indirectly (through one or more intermediaries) controlling, controlled by or

under common control with that Member or Manager; (b) a Person owning or

controlling ten percent (10%) or more of the outstanding voting securities or

beneficial interests of that Member or Manager; or (c) an officer, director,

partner or member, or a member of the immediate family of an officer, director,

partner or member, of that Member or Manager. For these purposes "control" means

the possession, direct or indirect, of the power to direct or cause the

direction of the management and policies of a Person, whether through the

ownership of voting securities, by contract or otherwise.

 

1.5 "AGREEMENT" means this Limited Liability Company Agreement of

StudioBuzz.com, LLC.

 

1.6 "AFFECTED INTEREST" has the meaning specified in Section 8.3.

 

1.7 "BANKRUPTCY" of a Member means the institution of any proceedings

under any federal or state law for the relief of debtors, including the filing

by or against that Member of a voluntary or involuntary case under the United

States Bankruptcy Code, which proceedings, if involuntary, are not dismissed

within sixty (60) days after their filing; an assignment of the property of that

Member for the benefit of creditors; the appointment of a receiver, trustee or

conservator of any substantial portion of the assets of that Member, which

appointment, if obtained ex parte, is not dismissed within sixty (60) days

thereafter; the seizure by a sheriff, receiver, trustee or conservator of any

substantial portion of the assets of that Member; the failure by that Member

generally to pay its debts as they become due within the meaning of Section

303(h)(1) of the United States Bankruptcy Code, as determined by the Bankruptcy

Court; or that Member's admission in writing of its inability to pay its debts

as they become due.

 

1.8 "BONA FIDE OFFER" means an offer in writing to an Interest Holder

offering to purchase all or any part of that Interest Holder's Membership

Interest or Economic Interest and setting forth all of the material terms and

conditions of the proposed purchase from an offeror who is ready, willing and

able to consummate the purchase and who is not an Affiliate of that Interest

Holder.

 

1.9 "CAPITAL ACCOUNT" of an Economic Interest Holder means the capital

account of that Economic Interest Holder determined from the inception of the

Company strictly in accordance with the rules set forth in Section

1.704-1(b)(2)(iv) of the Treasury Regulations. If any Membership Interest and/or

Economic Interest is Transferred pursuant to the terms of this Agreement, the

transferee shall succeed to the Capital Account of the transferor to the extent

the Capital Account is attributable to the Membership Interest and/or Economic

Interest so

 

 

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Transferred. In the event that assets of the Company other than cash

are distributed to an Economic Interest Holder in kind, Capital Accounts shall

be adjusted for the hypothetical "book" gain or loss that would have been

realized by the Company if the distributed assets had been sold for their fair

market values in a cash sale (in order to reflect unrealized gain or loss). In

the event of the liquidation of the Company, Capital Accounts shall be adjusted

for the hypothetical "book" gain or loss that would have been realized by the

Company if all Company assets had been sold for their fair market values in a

cash sale (in order to reflect unrealized gain or loss), whether as an initial

Capital Contribution, an additional Capital Contribution, or Additional Capital.

 

1.10 "CAPITAL CONTRIBUTION" of a Member, at any particular time, means

the amount of money or property, or a promissory note or other binding

obligation to contribute money or property, which that Member has theretofore

contributed to the capital of the Company, whether as an initial Capital

Contribution or an additional Capital Contribution.

 

1.11 "CERTIFICATE OF FORMATION" means the Certificate of Formation of the

Company as filed under the Act with the Delaware Secretary of State, as the same

may be amended from time to time.

 

1.12 "CLOSING" has the meaning specified in Section 8.3.

 

1.13 "CODE" means the Internal Revenue Code of 1986, as amended.

 

1.14 "COMPANY" means StudioBuzz.com, LLC, a Delaware limited liability

company.

 

1.15 "COMPANY MINIMUM GAIN" with respect to any taxable year of the

Company means the "partnership minimum gain" of the Company computed strictly in

accordance with the principles of Section 1.704-2(d) of the Treasury

Regulations.

 

1.16 "CONFIDENTIAL INFORMATION" means all information or material not

generally known by non-Company personnel which (i) gives the Company some

competitive business advantage or the opportunity of obtaining such advantage or

the disclosure of which could be detrimental to the interests of the Company,

(ii) which is owned by the Company or in which the Company has an interest and

(iii) which is (A) marked "Confidential Information," "Proprietary Information,"

or other similar marking, (B) known to be considered confidential and

proprietary by the Company, or (C) from all the relevant circumstances should

reasonably be assumed to be confidential and proprietary to the Company.

Confidential Information includes, but is not limited to, the following types of

information and other information of a similar nature (whether or not reduced to

writing): trade secrets, inventions, drawings, graphics, file data,

documentation, diagrams, specifications, know how, processes, formulas, models,

flow charts, software in various stages of development, source codes, object

codes, research and development procedures, research or development and test

results, marketing techniques and materials, marketing and development plans,

price lists, pricing policies, business plans, information relating to customers

and/or suppliers' identities, characteristics and agreements, financial

information and projections, and employee files. Confidential Information also

includes any information described above which the Company obtains from another

party and which the Company treats as proprietary or designates as Confidential

Information, whether or not owned

 

 

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or developed by the Company. NOTWITHSTANDING THE ABOVE, HOWEVER, NO

INFORMATION CONSTITUTES CONFIDENTIAL INFORMATION IF IT IS GENERIC INFORMATION

OR GENERAL KNOWLEDGE WHICH IS OTHERWISE PUBLICLY KNOWN AND IN THE PUBLIC

DOMAIN. Also, Confidential Information shall not include any information or

material owned by MediaChase and used by MediaChase in the ordinary course of

its business, unless used on an exclusive basis in the business of the

Company.

 

1.17 "CONTRIBUTION CAP" has the meaning specified in Section 3.2(a).

 

1.18 "DISTRIBUTABLE CASH" at any time means that portion of the cash then

on hand or in bank accounts of the Company which the Managers deem available for

Distribution to the Economic Interest Holders, taking into account (a) the

amount of cash required for the payment of all current expenses, liabilities and

obligations of the Company (whether for expense items, capital expenditures,

improvements, retirement of indebtedness or otherwise) and specifically

including repayments of principal or interest on Contribution Loans, and (b) the

amount of cash which the Managers deem necessary to establish reserves for the

payment of future capital expenditures, improvements, retirements of

indebtedness, operations and contingencies, known or unknown, liquidated or

unliquidated, including, but not limited to, liabilities which may be incurred

in litigation and liabilities undertaken pursuant to the indemnification

provisions of this Agreement.

 

1.19 "DISTRIBUTION" means the transfer of money or property by the

Company to one or more Economic Interest Holders without separate consideration.

 

1.20 "ECONOMIC INTEREST" means a share, expressed as a percentage, of one

or more of the Company's Net Profits, Net Losses, Tax Credits, Distributable

Cash or other Distributions, but does not include any other rights of a Member,

including, without limitation, the right to vote or participate in the

management of the Company or the right to information concerning the business

and affairs of the Company. The Economic Interest of each Economic Interest

Holder shall initially be the percentage set forth opposite the name of that

Economic Interest Holder in Exhibit A and may be adjusted from time to time

thereafter pursuant to the provisions of this Agreement, including, without

limitation, the provisions of Sections 4.1, 4.2 and 8.1.

 

1.21 "ECONOMIC INTEREST HOLDER" means the holder of an Economic Interest,

including either a Member, to the extent of the Economic Interest constituting a

part of its Membership Interest, or a Person who is not a member but holds

merely a bare Economic Interest.

 

1.22 "ECONOMIC RISK OF LOSS" means the economic risk of loss within the

meaning of Section 1.752-2 of the Treasury Regulations.

 

1.23 "ELIGIBLE MEMBERS" has the meaning specified in Section 7.3.

 

1.24 "FAIR MARKET VALUE" means, with respect to an asset, the price at

which that asset would be sold for cash payable at closing between a willing

buyer and a willing seller, each having reasonable knowledge of all relevant

facts concerning the asset and neither acting under any compulsion to buy or

sell.

 

1.25 "FISCAL YEAR" means the Company's fiscal year, which shall be the

calendar year.

 

 

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1.26 "FORMER MEMBER" has the meaning specified in Section 8.2.

 

1.27 "FORMER MEMBER'S INTEREST" has the meaning specified in Section

8.2(a).

 

1.28 "INTEREST HOLDER" means either a Member or a Person who holds merely

a bare Economic Interest.

 

1.29 "JOINT DESIGNEE" has the meaning specified in Section 5.2(a).

 

1.30 "MAJORITY IN INTEREST" means Voting Interests which, taken together,

exceed fifty percent (50%) of the aggregate of all Voting Interests held by all

Members entitled to vote or grant consent with respect to the matter in

question.

 

1.31 "MANAGERS" means the one or more managers of the Company selected by

the Members pursuant to Section 5.2(a) and shall be deemed to refer to the sole

Manager at all times when there exists only one Manager.

 

1.32 "MEDIACHASE" means MediaChase Ltd., a Delaware corporation.

 

1.33 "MEDIACHASE CONSULTING AGREEMENT" means that certain Consulting

Agreement, of even date herewith, between MediaChase and the Company.

 

1.34 "MEMBER" means each Person who (a) is an initial signatory to this

Agreement, has been admitted to the Company as a Member in accordance with this

Agreement or is a transferee of a Member who has become a Member in accordance

with Article VII, and (b) has not suffered a Membership Termination Event.

 

1.35 "MEMBER MINIMUM GAIN" has the meaning given to the term "partner

nonrecourse debt minimum gain" in Section 1.704-2(d) of the Treasury

Regulations.

 

1.36 "MEMBER NONRECOURSE DEBT" means any "partner nonrecourse liability"

or "partner nonrecourse debt" under Section 1.704-2(b)(4) of the Treasury

Regulations. Subject to the foregoing, it means any Company liability to the

extent the liability is nonrecourse for purposes of Section 1.1001-2 of the

Treasury Regulations and a Member (or related Person within the meaning of

Section 1.752-4(b) of the Treasury Regulations) bears the Economic Risk of Loss

under Section 1.752-2 of the Treasury Regulations because, for example, the

Member or related Person is the creditor or a guarantor.

 

1.37 "MEMBER NONRECOURSE DEDUCTIONS" means the Company deductions, losses

and Code Section 705(a)(2)(B) expenditures, as the case may be (as computed for

"book" purposes), that are treated as deductions, losses and expenditures

attributable to Member Nonrecourse Debt under Section 1.704-2(i)(2) of the

Treasury Regulations.

 

1.38 "MEMBERSHIP INTEREST" means a Member's total interest as a Member of

the Company, including that Member's Economic Interest, its options or similar

rights hereunder to acquire Membership Interests or Economic Interests, its

right to inspect the books and records of the Company and its right, to the

extent specifically provided in this Agreement or in the Act and

 

 

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not otherwise restricted herein, to participate in the business, affairs and

management of the Company and to vote or grant consent with respect to

matters coming before the Company.

 

1.39 "MEMBERSHIP TERMINATION EVENT" with respect to any Member means one

or more of the following: the withdrawal, resignation, expulsion, dissolution or

occurrence of any other event which terminates the continued membership of that

Member in the Company, other than a Transfer of a Member's Membership Interest

which is made in accordance with the provisions of Article VII.

 

1.40 "NET PROFITS" and "NET LOSSES" means, for each fiscal period, the

net income and net loss, respectively, of the Company determined strictly in

accordance with federal income tax principles (including rules governing

depreciation and amortization), except that in computing net income or net loss,

the "book" value of an asset will be substituted for its adjusted tax basis if

the two differ; and the following items shall be excluded from the computation:

 

(a) any gain, income, deductions or losses specially allocated under

Sections 6.1, 6.2 or 6.3;

 

(b) any Nonrecourse Deductions; and

 

(c) any Member Nonrecourse Deductions.

 

1.41 "NONCOMPETE DATE" has the meaning specified in Section 5.7(b).

 

1.42 "NONRECOURSE DEDUCTIONS" in any fiscal period means the amount of

Company deductions that are characterized as "nonrecourse deductions" under

Section 1.704-2(b) of the Treasury Regulations.

 

1.43 "NONRECOURSE LIABILITY" means a liability treated as a "nonrecourse

liability" under Sections 1.704-2(b)(3) and 1.752-1(a)(2) of the Treasury

Regulations.

 

1.44 "NOTICE" has the meaning specified in Section 8.3.

 

1.45 "OFFERED INTEREST" has the meaning specified in Section 7.3.

 

1.46 "ONLINEFILMSALES" means Onlinefilmsales.com, LLC, a Delaware limited

liability company.

 

1.47 "PERSON" means any entity, corporation, company, association, joint

venture, joint stock company, partnership, trust, limited liability company,

limited liability partnership, real estate investment trust, organization,

individual (including personal representatives, executors and heirs of a

deceased individual), nation, state, government (including agencies,

departments, bureaus, boards, divisions and instrumentalities thereof), trustee,

receiver or liquidator.

 

1.48 "PREFERRED RETURN" shall mean with respect to any Member, a

cumulative preferential rate of return in an amount equal to seven percent (7%)

per annum, on its Adjusted Capital Contributions.

 

 

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1.49 "PREFERRED RETURN ACCOUNT" shall mean with respect to any Member,

the excess of (i) that Member's Preferred Return, over (ii) all allocations to

that Member pursuant to Section 6.6(c) below.

 

1.50 "SECURITIES ACT" means the Securities Act of 1933.

 

1.51 "TAX CREDITS" means all credits against income or franchise taxes

and credits allowable to Economic Interest Holders under state, federal or other

tax statutes.

 

1.52 "TAX MATTERS PARTNER" means Onlinefilmsales, or any successor in

interest to Onlinefilmsales' entire Membership Interest, except as otherwise

provided in Section 9.4.

 

1.53 "TRANSFER" means, with respect to a Membership Interest, an Economic

Interest or any interest therein, the sale, assignment, transfer, disposition,

pledge, hypothecation or encumbrance, whether direct or indirect, voluntary,

involuntary or by operation of law, and whether or not for value, of (a) that

Membership Interest, Economic Interest or interest therein or (b) a controlling

interest in any Person which directly or indirectly through one or more

intermediaries holds that Membership Interest, Economic Interest or interest

therein. Transfer includes any transfer as a result of or in connection with any

property settlement or judgment incident to a divorce, dissolution of marriage

or separation, and any transfer by decree of distribution or other court order

in proceedings arising from the death of the spouse of any Member or Economic

Interest Holder.

 

1.54 "TREASURY REGULATIONS" means the regulations of the United States

Treasury Department pertaining to the income tax.

 

1.55 "UNITED STATES BANKRUPTCY CODE" means the United States Bankruptcy

Code at Title 11, United States Code.

 

1.56 "UNPAID PREFERRED RETURN" shall mean the excess of (i) the total

cumulative Preferred Return as of any given date over (ii) the sum of all prior

Distributions in payment of the Preferred Return pursuant to Section 6.8(a).

 

1.57 "VOTING INTEREST" means a Member's percentage right to vote on

matters coming before the Members for action. The Voting Interest of each Member

shall initially be the percentage set forth opposite the name of that Member in

Exhibit A and may be adjusted from time to time thereafter pursuant to the

provisions of this Agreement, including, without limitation, the provisions of

Sections 4.1, 4.2 and 8.1. The combined Voting Interest of all Members shall at

all times equal one hundred percent (100%).

 

References in this Agreement to "Articles," "Sections," "Exhibits" and

"Schedules" shall be to the Articles, Sections, Exhibits and Schedules of this

Agreement, unless otherwise specifically provided; all Exhibits and Schedules to

this Agreement are incorporated herein by reference; any of the terms defined in

this Agreement may, unless the context otherwise requires, be used in the

singular or the plural and in any gender depending on the reference; the words

"herein", "hereof" and "hereunder" and words of similar import, when used in

this Agreement, shall refer to this Agreement as a whole and not to any

particular provision of this Agreement; and except as otherwise specified in

this Agreement, all references in this Agreement (a) to any

 

 

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Person shall be deemed to include such Person's permitted heirs, personal

representatives, successors and assigns; and (b) to any agreement, any

document or any other written instrument shall be a reference to such

agreement, document or instrument together with all exhibits, schedules,

attachments and appendices thereto, and in each case as amended, restated,

supplemented or otherwise modified from time to time in accordance with the

terms thereof; and (c) to any law, statute or regulation shall be deemed

references to such law, statute or regulation as the same may be

supplemented, amended, consolidated, superseded or modified from time to time.

 

ARTICLE II

 

ORGANIZATIONAL MATTERS

 

2.1 NAME. The name of the Company shall be "StudioBuzz.com, LLC." The

business of the Company may be conducted under that name or, upon compliance

with applicable law, under any other name that the Managers deem appropriate or

advisable.

 

2.2 TERM. The term of the Company's existence commenced upon the filing

of its Certificate of Formation with the Delaware Secretary of State on March

17, 2000 and shall continue until such time as it is terminated pursuant to

Article X.

 

2.3 OFFICE AND AGENT. The principal office of the Company shall be at

1351 4th Street, Suite 227, Santa Monica, CA 90401, or at such other place as

the Managers may determine from time to time. The Company may also have such

other offices within the State of California, or elsewhere, as the Managers may

from time to time determine. The name and business address of the agent for

service of process for the Company in the State of Delaware is Corporation

Service Company, 1013 Centre Road, Wilmington, Delaware 19805, or such other

Person as the Managers may appoint from time to time.

 

2.4 PURPOSE OF COMPANY. The Company may engage in any lawful activity for

which a limited liability company may be organized under the Act; however, its

primary purpose shall be to engage in the following business: the creation of an

online database with the capability to store and provide access to information

relating to filmed entertainment rights.

 

2.5 INTENT. It is the intent of the Members that the Company shall always

be operated in a manner consistent with its treatment as a "partnership" for

Federal and state income tax purposes. It also is the intent of the Members that

the Company not be operated or treated as a "partnership" for purposes of

Section 303 of the United States Bankruptcy Code. No Member or Manager shall

take any action inconsistent with that express intent.

 

2.6 MEMBERS. The names, addresses, Capital Contributions, Voting

Interests and Economic Interests of the Members as of the date of this Agreement

are set forth in Exhibit A.

 

2.7 FORMATION EXPENSES. Each Member shall be responsible for and shall

pay all fees and expenses incurred by it in connection with the formation of the

Company, including, without limitation, all legal and accounting fees and

expenses incurred by it in connection with the negotiation, preparation,

execution and delivery of this Agreement and all related agreements

 

 

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and instruments. The Company shall pay all filing fees, minimum franchise or

other similar taxes and other governmental charges incident to its formation

and qualification to do business.

 

ARTICLE III

 

CAPITAL CONTRIBUTIONS

 

3.1 INITIAL CAPITAL CONTRIBUTIONS. MediaChase initially has contributed

to the Company the StudioBuzz Assets.

 

3.2 ADDITIONAL CAPITAL CONTRIBUTIONS.

 

(a) ADDITIONAL CONTRIBUTIONS BY ONLINEFILMSALES. Onlinefilmsales

shall contribute such monies and/or properties which are hereafter agreed upon

by all the Members. Immediately after such initial contribution by

Onlinefilmsales, the Managers shall complete Exhibit A to describe each Member's

initial Capital Contribution. In no event shall the sum of Onlinefilmsales

initial Capital Contribution and its additional Capital Contributions exceed an

amount hereafter to be agreed upon by all the Members ("Contribution Cap").

 

(b) ADDITIONAL CAPITAL. No Member or Economic Interest Holder shall

be required to make any additional Capital Contributions not specifically

referred to in Section 3.1.

 

3.3 CAPITAL ACCOUNTS. The Company shall establish and maintain an

individual Capital Account for each Economic Interest Holder.

 

3.4 NO WITHDRAWALS OF CAPITAL. No Economic Interest Holder shall have the

right to withdraw or reduce its Capital Contributions in the Company except as a

result of the dissolution of the Company or as otherwise provided in Section 4.2

or the Act, and no Economic Interest Holder shall have the right to demand or

receive property other than cash in return for its Capital Contributions.

 

3.5 LOANS; NO COMPENSATION. No Member or Economic Interest Holder shall

be required to lend any funds to the Company, and no Member or Economic Interest

Holder shall have any personal liability for the repayment of any Capital

Contribution of any other Member or Economic Interest Holder. No Member or

Economic Interest Holder shall receive any interest, salary or drawing with

respect to its Capital Contributions or its Capital Account or for services

rendered on behalf of the Company or otherwise in its capacity as a Member or

Economic Interest Holder, except as otherwise specifically provided in this

Agreement.

 

ARTICLE IV

 

MEMBERS

 

4.1 ADMISSION OF ADDITIONAL MEMBERS. Subject to compliance with

applicable law, additional Members may be admitted to the Company from time to

time upon the unanimous written approval of all Members.

 

 

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4.2 WITHDRAWALS OR RESIGNATIONS. No Member may withdraw or resign from

the Company except with the prior written consent of the Managers and all other

Members within the Prohibited Transfer Period (as defined in Section 7.1), which

consent may be given or withheld, conditioned or delayed in the Managers' and

the other Members' sole discretion. After the Prohibited Transfer Period, any

Member may withdraw or resign after thirty (30) day's written notice. If the

withdrawing or resigning Member is the last and only remaining Member, the

withdrawal or resignation shall be effective only after the expiration of the

period for Member consent to continue the business of the Company or dissolve,

as provided in Section 8.1. Any withdrawal or resignation (whether prior to or

after the Prohibited Transfer Period) of a Member shall constitute a Membership

Termination Event (other than a Transfer made in accordance with the provisions

of Article VII), and upon the occurrence thereof, that Member's Membership

Interest may, at the election of the Managers, either be converted to a bare

Economic Interest or purchased as provided in Section 8.2(c). If a Member

withdraws in violation of this Agreement, the Member shall forfeit his, her or

its Voting Interest and Economic Interest without further compensation. In

addition, the Member will be liable to the Company and the other Members and/or

Economic Interest Holders for all damages suffered by the Company and the other

Members and/or Economic Interest Holders as a result of such withdrawal.

 

4.3 MEMBERS ARE NOT AGENTS. The management of the Company is vested

exclusively in the Managers. No Member may be an agent of the Company, nor may

any Member, in its capacity as a Member, bind or execute any agreement,

instrument or document on behalf of the Company without the prior written

consent of the Managers.

 

4.4 MEETINGS OF MEMBERS; WRITTEN CONSENT. The Members do not contemplate

holding meetings; however, meetings of the Members may be held if called by the

Managers in their sole and absolute discretion, at such times and places within

or without the State of California as the Managers fix from time to time. No

annual or regular meetings of Members are required, but if such meetings are

held, they shall be noticed, held and conducted pursuant to the Act. Members may

participate in any meeting through the use of conference telephones or similar

communications equipment as long as all Members participating can hear one

another. A Member so participating is deemed to be present in person at the

meeting. Any action which may be taken by the Members at a meeting may also be

taken without a meeting, if a consent in writing setting forth the action so

taken is signed by Members having not less than the minimum votes that would be

necessary to authorize that action at a meeting of the Members duly called and

noticed.

 

ARTICLE V

 

MANAGEMENT AND CONTROL OF THE COMPANY

 

5.1 MANAGEMENT OF THE COMPANY BY THE MANAGERS.

 

(a) EXCLUSIVE MANAGEMENT BY THE MANAGERS. The business, property and

affairs of the Company shall be managed exclusively by the Managers. Except for

matters as to which the approval of the Members is expressly required by the

Act, Section 5.3, or otherwise in this Agreement, the Managers shall have full,

complete and exclusive authority, power and

 

 

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discretion to manage and control the business, property and affairs of the

Company, to make all decisions regarding those matters and to perform any and

all other actions customary or incident to the management of the Company's

business, property and affairs.

 

(b) POWERS OF THE MANAGERS. Without limiting the generality of the

foregoing, the Managers, acting in concert but without the need to obtain any

approval from the Members, except only as required in Section 5.3 or otherwise

in this Agreement or the Act, shall have the exclusive power and authority to

cause the Company:

 

(i) to do any act in the conduct of its business and to

exercise all powers granted to a limited liability company under the Act,

whether in the state of California or in any other state, territory, district or

possession of the United States or any foreign country, that may be necessary,

convenient, desirable or incidental to the accomplishment of the business

purposes of the Company;

 

(ii) to own, hold, operate, maintain, finance, refinance,

improve, lease, sell, convey, mortgage, transfer, demolish or dispose of any

asset as may be necessary, convenient, desirable or incidental to the

accomplishment of the business purposes of the Company;

 

(iii) to enter into, perform and carry out any contracts,

leases, instruments, commitments, agreements or other documents of any kind,

including, without limitation, contracts with any Member or Manager, any

Affiliate thereof or any agent of the Company, necessary, convenient, desirable

or incidental to the accomplishment of the business purposes of the Company;

 

(iv) to sue and be sued, complain and defend and participate

in administrative or other proceedings, in its own name;

 

(v) to appoint officers, employees and agents of the Company,

define their duties and fix their compensation, if any, and to select attorneys,

accountants, consultants and other advisors of the Company;

 

(vi) to indemnify any Person in accordance with the Act and

to obtain any and all types of insurance;

 

(vii) to borrow money from any Person, and issue evidences of

indebtedness and to secure the same by mortgages, deeds of trust, security

agreements, pledges, collateral assignments or other liens on the assets of the

Company;

 

(viii) to negotiate, enter into, renegotiate, extend, renew,

terminate, modify, amend, waive, execute, acknowledge or take any other action

with respect to any loan agreement, commitment, deed of trust, mortgage,

security agreement or other loan document in respect of any assets of the

Company;

 

(ix) to pay, collect, compromise, litigate, arbitrate or

otherwise adjust or settle any and all other claims or demands of or against the

Company or to hold such proceeds against the payment of contingent liabilities;

 

 

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(x) to make, execute, acknowledge, endorse and file any and

all agreements, documents, instruments, checks, drafts or other evidences of

indebtedness necessary, convenient, desirable or incidental to the

accomplishment of the business purposes of the Company;

 

(xi) to cease the Company's activities and dissolve and wind

up its affairs upon its duly authorized dissolution; and

 

(xii) to cause any special purpose subsidiary limited liability

company wholly owned by the Company to do any of the foregoing.

 

(c) AGENCY AUTHORITY OF THE MANAGERS; DELEGATION BY THE MANAGERS.

Any one Manager shall be authorized to endorse all checks, drafts and other

evidences of indebtedness made payable to the order of the Company and, once

approved as required under Section 5.1(g) or as specifically required elsewhere

in this Agreement, to execute all agreements, contracts, commitments, checks,

instruments and other documents on behalf of the Company. The Managers may also

delegate any or all of their authority, rights and/or obligations, whether

arising hereunder, under the Act or otherwise, to any one or more officers,

agents or other duly authorized representatives of the Company.

 

(d) DISCRETION OF THE MANAGERS. In making any and all decisions

relating to the conduct of the Company's business or otherwise delegated to them

by any provision of this Agreement, the Managers shall be free to exercise their

sole, absolute and unfettered discretion so long as such decision was made by

the Managers in good faith for a purpose reasonably believed by them to be in,

or not opposed to, the best interests of the Company. The Managers shall not, in

respect of any such decision, be liable to the Company, the Members or any of

their respective Affiliates or constituent owners for any resulting actual or

alleged losses, damages, costs or expenses suffered by them so long as such

decision was made by the Managers in good faith for a purpose reasonably

believed by them to be in, or not opposed to, the best interests of the Company.

 

(e) PERFORMANCE OF DUTIES; LIABILITY OF MANAGERS. The Managers shall

perform their managerial duties in good faith and in a manner they believe to be

in, or not opposed to, the best interests of the Company. In performing their

duties, the Managers shall be entitled to rely on information, opinions, reports

or statements, including financial statements and other financial data, of any

attorney, independent accountant or other Person as to matters which the

Managers believe to be within such Person's professional or expert competence

unless the Managers have actual knowledge concerning the matter in question that

would cause such reliance to be unwarranted.

 

(f) DEVOTION OF TIME. The Managers shall not be obligated to devote

all of their time or business efforts to the affairs of the Company; however,

they shall devote such time, effort and skill as they deem appropriate for the

management and operation of the Company's affairs.

 

(g) DECISIONS OF THE MANAGERS. Except to the extent that this

Agreement expressly requires the unanimous approval of all of the Managers, any

decision or action taken

 

 

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by a majority in number of the Managers (whether verbally or in writing,

whether in person or by proxy and whether or not at a formal meeting called

pursuant to Section 5.1(h) shall constitute the act or decision of the

Managers.

 

(h) MEETINGS OF MANAGERS. Meetings of the Managers may be called by

any Manager or by the Chairperson, President, any Senior Vice-President or

Vice-President or the Secretary of the Company, if any. All meetings shall be

held upon four (4) days' notice by mail or forty-eight (48) hours' notice

delivered personally or by telephone, telegraph or facsimile. A notice need not

specify the purpose of any meeting. Notice of a meeting need not be given to any

Manager who signs a waiver of notice, a consent to holding the meeting or an

approval of the minutes thereof, whether before or after the meeting, or who

attends the meeting without protesting the lack of notice prior to the

commencement of the meeting. All such waivers, consents and approvals shall be

filed with the Company records or made a part of the minutes of the meeting. A

majority of the authorized number of Managers shall constitute a quorum of the

Managers for the transaction of business, and except to the extent that this

Agreement expressly requires the approval of all of the Managers, every act or

decision done or made by a majority in number of the Managers present at a

meeting duly held at which a quorum is present shall be the act of the Managers.

A meeting at which a quorum is initially present may continue to transact

business notwithstanding the withdrawal of Managers if any action taken is

approved by at least a majority of the required quorum for the meeting. Managers

may participate in any meeting of the Managers by means of conference telephones

or similar communications equipment so long as all Managers participating can

hear one another. A Manager so participating is deemed to be present at the

meeting.

 

The provisions of this Section 5.1(h) govern meetings of the Managers if

the Managers elect, in their discretion, to hold meetings. However, nothing in

this Section 5.1(h) or in this Agreement is intended to require that meetings of

the Managers be held, it being the intent of the Members that meetings of the

Managers are not required.

 

5.2 ELECTION OF MANAGERS.

 

(a) NUMBER AND TERM. The Company shall have one (1), or such other

number as Onlinefilmsales shall designate from time to time, Manager, who shall

be designated by Onlinefilmsales. The initial Manager shall be Onlinefilmsales.

Onlinefilmsales shall have the right to change the identity and number of the

Manager(s) appointed by it at any time and for any reason, by written notice to

the other Member, and each Manager so appointed shall serve in that capacity

until he or she resigns or is removed by Onlinefilmsales, in its absolute

discretion.

 

(b) VACANCIES. Any vacancy occurring for any reason in the number of

Managers may be filled by designation of Onlinefilmsales.

 

5.3 LIMITATIONS ON POWER OF THE MANAGERS. The limitations on the

Managers' power in this Section 5.3 shall apply:

 

(a) the sale, exchange or other disposition of all, or substantially

all, of the Company's assets occurring as part of a single transaction or plan,

or in a series of transactions,

 

 

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shall require not only the approval of the Managers, but also the affirmative

vote or written consent of Members holding at least seventy-five percent

(75%) of all Voting Interests;

 

(b) the merger of the Company with another limited liability company

or a corporation, general partnership or limited partnership shall require not

only the approval of the Managers, but also the affirmative vote or written

consent of Members holding at least seventy-five percent (75%) of all Voting

Interests; provided, however, that in no event shall a Member be required to

become a general partner in a merger with a general or limited partnership

without that Member's express written consent or unless the agreement of merger

provides each Member with the dissenter's rights described in the Act;

 

(c) any decision to admit a Person as a Member of the Company shall

require not only the approval of the Managers, but also the affirmative vote or

written consent of all of the Members;

 

(d) any decision to compromise the obligation of a Member to a make

a Capital Contribution or to return money or property paid or distributed in

violation of the Act shall require not only the approval of the Managers, but

also the affirmative vote or written consent of Members holding at least

seventy-five percent (75%) of the Voting Interests of all non-interested

Members;

 

(e) any act which would make it impossible to carry on the ordinary

business of the Company shall require not only approval of the Managers, but

also the affirmative vote or written consent of Members holding at least

seventy-five percent (75%) of all Voting Interests;

 

(f) any decision to place the Company into Bankruptcy shall require

not only the approval of the Managers, but also the affirmative vote or written

consent of Members holding at least seventy-five percent (75%) of all Voting

Interests; and

 

(g) any amendment to the Certificate of Formation or this Agreement

shall require not only the approval of the Managers, but also the affirmative

vote or written consent of Members holding at least seventy-five percent (75%)

of all Voting Interests, provided, however, that there shall be no change in the

purpose of the Company and provided further that no amendment will be binding on

a Member that diminishes its rights or increases its obligations unless approved

by such Member.

 

5.4 MEMBERS HAVE NO MANAGERIAL AUTHORITY. The Members shall have no power

to participate in the management of the Company except as expressly authorized

by this Agreement and except as expressly required by any non-waivable provision

of the Act. Without the written authorization of the Managers to do so, no

Member shall have any power or authority to bind or act on behalf of the Company

in any way, to pledge its assets or to render it liable for any purpose.

 

5.5 TRANSACTIONS BETWEEN THE COMPANY AND THE MANAGERS, THE MEMBERS OR

THEIR AFFILIATES.

 

(a) CONTRACTS WITH AFFILIATES. Notwithstanding that it may

constitute a conflict of interest, the Members who are not also Managers may,

and may cause their Affiliates to,

 

 

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engage in any transaction (including, without limitation, the purchase, sale,

lease or exchange of any property, the lending of money, the rendering of any

service or the establishment of any salary, other compensation or other terms

of employment) with the Company so long as that transaction is not expressly

prohibited by this Agreement, the transaction is approved by the Managers and

the transaction is fair to the Company and is on commercially reasonable

terms.

 

(b) CONTRACTS WITH MANAGERS OR AFFILIATES OF THE MANAGERS. The

Members acknowledge and intend that the Managers may provide, or cause the

Company to engage one or more of its Affiliates to provide, any or all goods

and/or services required by the Company in the conduct of its business and may

engage in any transaction (including, without limitation, the purchase, sale,

lease or exchange of any property, the lending of money, the rendering of any

service or the establishment of any salary, other compensation or other terms of

employment) with the Company, and that, except only as expressly limited below,

the terms and conditions of any such engagement shall be determined exclusively

by the Managers in their sole and absolute discretion; provided, however, that

notwithstanding anything to the contrary set forth in this Agreement, all

disinterested Members must approve the terms and conditions of any engagement by

the Managers of one or more of the Managers' Affiliates prior to the Company

entering into such engagement, which approval shall not be unreasonably

withheld.

 

(c) TREATMENT OF AFFILIATE LOANS AND FEES. To the fullest extent

permitted by law, all principal, interest, costs and expenses owing by the

Company to the Members, the Managers and/or Affiliates thereof in repayment of

loans and all fees, commissions and/or reimbursable amounts payable by the

Company to the Members, the Managers and/or Affiliates thereof shall be treated

in the same manner as liabilities payable to unaffiliated creditors of the

Company and shall be paid and taken into account, as such, before any

Distributions of Distributable Cash are made to the Economic Interest Holders.

 

5.6 OFFICERS.

 

(a) APPOINTMENT OF OFFICERS. The Managers may, at their discretion,

appoint officers of the Company at any time. The officers of the Company may

include a Chairperson, a President or Chief Executive Officer, one or more

Senior Vice Presidents, one or more Vice Presidents, a Secretary, Assistant

Secretaries, a Chief Financial Officer, a Treasurer and one or more Assistant

Treasurers and a Comptroller. The officers shall serve at the pleasure of the

Managers, subject to all rights, if any, of an officer under any contract of

employment. Any individual may hold any number of offices. Officers of the

Managers may serve as officers of the Company if appointed by the Managers. The

officers shall exercise such powers and perform such duties as are typically

exercised by similarly titled officers in a corporation and as shall be

determined from time to time by the Managers. If any such officer is entitled to

a salary for his or her services, however, all of that salary shall be paid by

the Company.

 

(b) SIGNING AUTHORITY OF OFFICERS. The officers, if any, shall have

such authority to sign checks, instruments and other documents on behalf of the

Company as may be delegated to them by the Managers in writing.

 

(c) ACTS OF OFFICERS AS CONCLUSIVE EVIDENCE OF AUTHORITY. Any note,

mortgage, deed of trust, evidence of indebtedness, contract, certificate,

statement, conveyance or

 

 

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other instrument or obligation in writing, and any assignment or endorsement

thereof, executed or entered into between the Company and any other Person,

when signed by the Chairperson, the President or Chief Executive Officer, any

Senior Vice-President and any Secretary, any Assistant Secretary, any

Treasurer, or any Assistant Treasurer of the Company, is not invalidated as

to the Company by any lack of authority of the signing officers in the

absence of actual knowledge on the part of the other Person that the signing

officer(s) had no authority to execute the same.

 

5.7 COMPETING ACTIVITIES. The Manager, the Members and the Economic

Interest Holders, and their respective officers, directors, shareholders,

partners, members, managers, agents, employees and Affiliates, may engage or

invest in, independently or with others, any business activity of any type or

description, including without limitation, those that might be the same as or

similar to the Company's business and that might be in direct or indirect

competition with the Company. None of the Company, the Manager, or any other

Member or Economic Interest Holder shall have the right in or to such other

business activities or to the income or proceeds derived therefrom. None of the

Manager or the Members or Economic Interest Holders shall be obligated to

present any investment opportunity or prospective economic advantage to the

Company or the Manager, other Members or Economic Interest Holders even if the

opportunity is one of the character that, if presented to the Company or the

Manager, other Members or Economic Interest Holders, could be taken by the

Company or any of the Manager, other Members or Economic Interest Holders. The

Manager, the Members and the Economic Interest Holders shall have the right to

hold any investment opportunity or prospective economic advantage for their own

account or to recommend such opportunity to Persons other than the Company or

the Manager, other Members or Economic Interest Holders. The Members and

Economic Interest Holders acknowledge that the Manager and the other Members or

Economic Interest Holders and their Affiliates own and/or manage other

businesses, including businesses that may compete with the Company and for the

Manager's and Members' time. The Members and Economic Interest Holders hereby

waive any and all rights and claims which they may otherwise have against the

Manager and the other Members and Economic Interest Holders and their respective

officers, directors, shareholders, partners, members, managers, agents,

employees and Affiliates as a result of any such activities. Notwithstanding the

foregoing, the provisions of this Section 5.7 shall be subject to the terms of

the MediaChase Consulting Agreement (a "Related Party Agreement"), and in the

event of any conflict, the terms and provisions of such separate agreement shall

control.

 

5.8 PAYMENTS TO MANAGERS AND OTHERS. The Company is authorized to pay any

Person remuneration or reimbursement for goods and services provided to the

Company. Without limiting the generality of the foregoing, the Company shall pay

the Members, the Economic Interest Holders and their Affiliates for services

rendered or goods provided by them to the Company to the extent that those

Members, Economic Interest Holders or Affiliates are not required to render such

services or goods themselves without charge to the Company, and to the extent

that the fees paid to those Members, Economic Interest Holders or Affiliates do

not exceed the fees that would be payable to independent responsible third

parties that are willing to perform those services or provide those goods.

 

5.9 EXPENSES. The Company shall reimburse the Managers and their

Affiliates for all reasonable out-of-pocket costs and expenses incurred by them

in connection with the business and affairs of the Company, as well as

organizational expenses (including, without limitation,

 

 

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legal and accounting fees and costs) incurred by them to form the Company and

prepare the Certificate of Formation (other than expenses incurred in

connection with the preparation and negotiation of this Agreement), subject

to the Managers receiving advance approval from all non-Manager Members in

the case of expenses (or a series of related expenses) in excess of an amount

to be agreed upon by all the Members in any month. The Managers may allocate

to the Company, on any basis selected by them in good faith which is

consistent with good accounting practice, a portion of any and all expenses,

including general, special and administrative expenses, incurred by them or

their Affiliates for the benefit of the Company, subject to the Managers

receiving advance approval from all non-Manager Members in the case of an

allocation to the Company (or a series of related allocations) in excess of

an amount to be agreed upon by all the Members in any month.

 

ARTICLE VI

 

ALLOCATIONS OF NET PROFITS, NET LOSSES AND DISTRIBUTIONS

 

6.1 MINIMUM GAIN CHARGEBACK. In the event that there is a net decrease in

the Company Minimum Gain during any taxable year, the minimum gain chargeback

described in Sections 1.704-2(f) and (g) of the Treasury Regulations shall

apply.

 

6.2 MEMBER MINIMUM GAIN CHARGEBACK. If during any taxable year there is a

net decrease in Member Minimum Gain, the partner minimum gain chargeback

described in Section 1.704-2(i)(5) of the Treasury Regulations shall apply.

 

6.3 QUALIFIED INCOME OFFSET. Any Economic Interest Holder who

unexpectedly receives an adjustment, allocation or Distribution described in

subparagraphs (4), (5) or (6) of Section 1.704-1(b)(2)(ii)(d) of the Treasury

Regulations, which adjustment, allocation or distribution creates or increases a

deficit balance in that Economic Interest Holder's Capital Account, shall be

allocated items of "book" income and gain in accordance with the provisions of

the "qualified income offset" as described in Section 1.704-1(b)(2)(ii)(d) of

the Treasury Regulations.

 

6.4 NONRECOURSE DEDUCTIONS. Nonrecourse Deductions shall be allocated to

the Economic Interest Holders in proportion to their Economic Interests.

 

6.5 MEMBER NONRECOURSE DEDUCTIONS. Member Nonrecourse Deductions shall be

allocated to the Economic Interest Holders as required in Section 1.704-2(i)(1)

of the Treasury Regulations in accordance with the manner in which the Economic

Interest Holders bear the burden of an Economic Risk of Loss corresponding to

the Member Nonrecourse Deductions.

 

6.6 ALLOCATION OF NET PROFITS. The Net Profits for each fiscal period of

the Company shall be allocated to the Economic Interest Holders in accordance

with the following order of priority:

 

(a) first, to those Economic Interest Holders with negative Adjusted

Capital Accounts, among them in proportion to the ratio of the negative balances

in their Adjusted Capital Accounts, until no Economic Interest Holder has a

negative Adjusted Capital Account;

 

 

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(b) second, to those Economic Interest Holders whose Adjusted

Capital Contributions are in excess of their Adjusted Capital Accounts, among

them in accordance with the ratio of these excesses, until all of these excesses

have been eliminated;

 

(c) third, to each Member in proportion to each Member's Preferred

Return Account, until the Preferred Return Account of each is reduced to zero;

and

 

(d) finally, to the Economic Interest Holders in proportion to their

Economic Interests.

 

6.7 ALLOCATION OF NET LOSSES. Net Losses for each fiscal period of the

Company shall be allocated to the Economic Interest Holders in accordance with

the following order of priority:

 

(a) first, to those Economic Interest Holders with positive Adjusted

Capital Accounts, in proportion to the ratio of the positive balances in their

Adjusted Capital Accounts, until no Economic Interest Holder has a positive

Adjusted Capital Account; and

 

(b) finally, to the Economic Interest Holders in proportion to their

Economic Interests.

 

6.8 DISTRIBUTIONS BY THE COMPANY. Subject to applicable law and any

limitations contained elsewhere in this Agreement, the Managers may elect from

time to time to cause the Company to distribute Distributable Cash to the

Economic Interest Holders, which Distributions shall be in the following order

of priority:

 

(a) first, to each Member in proportion to each Member's Unpaid

Preferred Return, until the Unpaid Preferred Return of each has been reduced to

zero;

 

(b) second, to each Member in proportion to each Member's Adjusted

Capital Contributions, until the Adjusted Capital Contributions of each are

reduced to zero; and

 

(c) finally, to the Economic Interest Holders in proportion to their

Economic Interests.

 

6.9 ALLOCATION OF NET PROFITS AND LOSSES AND DISTRIBUTIONS IN RESPECT OF

A TRANSFERRED INTEREST. If any Economic Interest is Transferred or is increased

or decreased by reason of the admission of a new Economic Interest Holder or

otherwise during any Fiscal Year, each item of income, gain, loss, deduction or

credit of the Company for that Fiscal Year shall be allocated based on the

"interim closing of the books" method.

 

6.10 TAX ALLOCATION MATTERS.

 

(a) CONTRIBUTED OR REVALUED PROPERTY. Each Economic Interest

Holder's allocable share of the taxable income or loss of the Company,

depreciation, depletion, amortization and gain or loss with respect to any

contributed property, or with respect to revalued property where the Company's

property is revalued pursuant to Paragraph (b)(2)(iv)(f) of Section 1.704-1 of

the Treasury Regulations, shall be determined in the manner (and as to

revaluations, in the same manner as) provided in Section 704(c) of the Code. The

allocation shall

 

 

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take into account, to the full extent required or permitted by the Code, the

difference between the adjusted basis of the property to the Economic

Interest Holder contributing it and the fair market value of the property

determined by the Managers at the time of its contribution or revaluation, as

the case may be. The Company shall apply Section 704(c)(1)(A) by using the

"traditional method" as set forth in Section 1.704-3(b) of the Treasury

Regulations.

 

(b) RECAPTURE ITEMS. In the event that the Company has taxable

income that is characterized as ordinary income under the recapture provisions

of the Code, each Economic Interest Holder's distributive share of taxable gain

or loss from the sale of Company assets (to the extent possible) shall include a

proportionate share of this recapture income equal to that Economic Interest

Holder's share of prior cumulative depreciation deductions with respect to the

assets which gave rise to the recapture income.

 

6.11 ORDER OF APPLICATION. To the extent that any allocation,

Distribution or adjustment specified in any of the preceding Sections of this

Article VI affects the results of any other allocation, Distribution or

adjustment required herein, the allocations, Distributions and adjustments

specified in the following Sections shall be made in the priority listed:

 

(a) Section 6.8.

 

(b) Section 6.1.

 

(c) Section 6.2.

 

(d) Section 6.3.

 

(e) Section 6.4.

 

(f) Section 6.5.

 

(g) Section 6.7.

 

(h) Section 6.6.

 

(i) Section 10.4.

 

These provisions shall be applied as if all Distributions and

allocations were made at the end of the Company's Fiscal Year. Where any

provision depends on the Capital Account of any Economic Interest Holder, that

Capital Account shall be determined after the operation of all preceding

provisions for the Fiscal Year.

 

6.12 ALLOCATION OF LIABILITIES. Each Economic Interest Holder's interest

in "partnership" profits for purposes of determining that Member's share of

"excess nonrecourse liabilities" of the Company as used in Section 1.752-3(a)(3)

of the Treasury Regulations, shall be equal to that Economic Interest Holder's

Economic Interest.

 

6.13 FORM OF DISTRIBUTION. No Economic Interest Holder, regardless of the

nature of its Capital Contribution, has the right to demand and receive any

Distribution from the Company

 

 

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in any form other than money. No Economic Interest Holder may be compelled to

accept from the Company a Distribution of any asset in kind in lieu of a

proportionate Distribution of money being made to other Economic Interest

Holder(s), and except upon a dissolution and the winding up of the Company,

no Economic Interest Holder may be compelled to accept a Distribution of any

asset in kind.

 

ARTICLE VII

 

TRANSFER OF INTERESTS

 

7.1 TRANSFER OF INTERESTS. Notwithstanding anything to the contrary set

forth elsewhere herein, no Member may, except as permitted in Section 7.3,

Transfer all or any part of its Membership Interest or its Economic Interest,

for any reason, within the one (1) year period (the "Prohibited Transfer

Period") commencing upon the date hereof. Any attempted Transfer during such

Prohibited Transfer Period shall be null and void ab initio, and the transferee

shall not become either a Member or an Economic Interest Holder. After the

Prohibited Transfer Period, any Member may Transfer all or any part of its

Membership Interest or Economic Interest provided it has complied with Section

7.3. After the consummation of any permitted Transfer of all or any part of a

Membership Interest or an Economic Interest, the Membership Interest or Economic

Interest so Transferred shall continue to be subject to the terms and provisions

of this Agreement, and any further Transfers shall be required to comply with

the terms and provisions of this Agreement.

 

7.2 [intentionally omitted]

 

7.3 RIGHT OF FIRST REFUSAL. At any time after the Prohibited Transfer

Period, if any Member decides to Transfer all or any part of its Membership

Interest or Economic Interest (the "Offered Interest") pursuant to a Bona Fide

Offer, that Member shall give written notice to the Company and to all other

Members (the "Eligible Members"), setting forth in full the terms of such Bona

Fide Offer and the identity of the offeror(s). The Company shall then have the

right and option, for a period ending thirty (30) calendar days following its

receipt of the written notice, to elect to purchase all or any part of the

Offered Interest at the purchase price and upon the terms specified in the Bona

Fide Offer, and the Eligible Members (pro rata in accordance with the ratio of

their Economic Interests) shall then have the right and option, for a period of

twenty (20) days thereafter, to elect to purchase all or any part of the Offered

Interest not elected to be purchased by the Company at the purchase price and

upon the terms specified in the Bona Fide Offer. If all Eligible Members do not

elect to purchase the entire balance of the Offered Interest, then the Eligible

Members electing to purchase shall have the right and option, for a period of

ten (10) days thereafter and pro rata in accordance with the ratio of their

Economic Interests, to elect to purchase the balance of the Offered Interest

available for purchase.

 

 

Notwithstanding the foregoing, however, if the Company and/or the

Eligible Members do not elect to purchase all of the Offered Interest subject to

the right of first refusal pursuant to this Section 7.3, the Member desiring to

Transfer may Transfer all of the Offered Interest to the original proposed

transferee upon the terms set forth in the written notice provided to the

Company, whereupon the original proposed transferee shall take and hold the

Offered Interest subject to this Agreement and to all of the obligations and

restrictions upon the Member from

 

 

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whom such Offered Interest was acquired and shall observe and comply with

this Agreement and with all such obligations and restrictions. Any such

Transfer of the Offered Interest to the original proposed transferee must be

effected within ninety (90) calendar days after the date of the termination

of the right of first refusal options provided above. If no such Transfer is

effected within such ninety (90) calendar day period, then any subsequent

proposed Transfer of all or any part of the Membership Interest or Economic

Interest of the Member desiring to Transfer shall once again be subject to

the provisions of this Section 7.3.

 

For these purposes, if any consideration offered for the Offered Interest

in the Bona Fide Offer consists of rights, interests or property other than

money or an obligation to pay money, the Managers shall, in good faith,

determine the Fair Market Value of that consideration in monetary terms as of

the date the Bona Fide Offer was received by the Member desiring to Transfer.

The Fair Market Value of that consideration in monetary terms, as so determined,

shall be included in the purchase price payable by the Company and/or the

purchasing Members hereunder, but, in order to exercise their rights of first

refusal granted above, neither the Company nor the purchasing Members need

transfer to the Member desiring to Transfer the actual rights, interests or

property offered in the Bona Fide Offer nor afford the Member desiring to

Transfer the same tax treatment which would have been available to it under the

Bona Fide Offer.

 

7.4 [intentionally omitted]

 

7.5 [intentionally omitted]

 

7.6 [intentionally omitted]

 

7.7 REPURCHASE RESTRICTIONS IMPOSED BY LAW. Notwithstanding anything to

the contrary stated herein, the Company's right to exercise any option provided

in this Article VII shall be subject to the restrictions governing prohibited

Company Distributions set forth in the Act and such other pertinent federal and

state laws, rules, regulations or other governmental restrictions as may now or

hereafter be in effect.

 

7.8 FURTHER RESTRICTIONS ON TRANSFER OF INTERESTS. In addition to any

other restrictions found in this Agreement, no Interest Holder may Transfer its

Membership Interest, its Economic Interest or any part thereof (a) without

compliance with the Securities Act, the California Corporate Securities Law of

1968 and any other applicable securities laws, and (b) if the Transfer could

result in the Company not being classified as a partnership for federal or state

income tax purposes, in each case as determined by the Managers. Any attempted

or purported Transfer in violation of this Section 7.8 shall be null and void ab

initio, and the transferee shall not become either a Member or an Economic

Interest Holder.

 

7.9 SUBSTITUTION OF MEMBERS. Notwithstanding anything in this Agreement

to the contrary, no transferee of the whole or any part of a Membership Interest

shall become a substituted Member in the place of its transferor unless all of

the following conditions are satisfied:

 

(a) the Transferring Interest Holder and the transferee execute and

acknowledge such other instrument or instruments as the Managers may deem

necessary or desirable to effectuate the admission, including the written

acceptance and adoption by the

 

 

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transferee of all of the terms and conditions of this Agreement as the same

may have been amended; and

 

(b) The transferee pays to the Company a transfer fee which is

sufficient, in the reasonable discretion of the Managers, to cover all expenses

incurred by the Company in connection with the Transfer and substitution.

 

7.10 ENFORCEMENT. The Transfer restrictions contained in this Agreement

are of the essence of the ownership of a Membership Interest or an Economic

Interest. Upon application to any court of competent jurisdiction, the Company

shall be entitled to a decree against any Person violating or about to violate

such restrictions, requiring their specific performance, including those

requiring a Member or an Economic Interest Holder to sell all or part of its

Membership Interest or Economic Interest to the Company and/or the other

Members, or prohibiting a Transfer of all or part of a Membership Interest or an

Economic Interest.

 

7.11 EFFECT OF TRANSFERS IN VIOLATION OF AGREEMENT. If, for any reason, a

court refuses to enforce the provisions of Section 7.1 to the effect that a

Transfer in violation of this Article VII is null and void, then, upon any such

Transfer of a Membership Interest or part thereof in violation of this Article

VII, the transferee shall have no right to vote or participate in the management

of the business, property and affairs of the Company or to exercise any rights

of a Member. The transferee shall only be entitled to become an Economic

Interest Holder to the extent of the Membership Interest attempted or purported

to be Transferred to it in violation of this Agreement and thereafter shall only

receive the share of the Company's Net Profits, Net Losses, Tax Credits,

Distributable Cash, and other Distributions to which the Transferring Interest

Holder would otherwise have been entitled.

 

ARTICLE VIII

 

CONSEQUENCES OF MEMBERSHIP TERMINATION EVENTS

 

8.1 DISSOLUTION OF COMPANY. The occurrence of a Membership Termination

Event as to any Member other than the last and only remaining Member shall not

dissolve the Company. Upon the occurrence of a Membership Termination Event as

to the last and only remaining Member, the Company shall dissolve unless the

Managers and the successor-in-interest of the last and only remaining Member

consent in writing within ninety (90) days of such Membership Termination Event

to the continuation of the Company and to the admission of such personal

representative or other successor-in-interest, or its designee or nominee, as a

Member.

 

8.2 ADMISSION OR CONVERSION. Upon the occurrence of a Membership

Termination Event with respect to a Member under circumstances where the Company

does not dissolve, the Managers shall determine which one of the following shall

occur and give written notice thereof to the remaining Members and to the Member

who suffered the Membership Termination Event (the "Former Member"):

 

(a) the Former Member's successor-in-interest shall be admitted as a

Member of the Company in the place and stead of the Former Member to the extent

of the Former Member's Membership Interest (the "Former Member's Interest");

provided, however, that the

 

 

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Managers may not elect this alternative without the affirmative vote or

written consent of Members constituting a Majority in Interest of all

remaining Members holding at least seventy-five percent (75%) of the Voting

Interests of all remaining Members;

 

(b) the Former Member's Interest shall be converted to a bare

Economic Interest, and the Former Member's successor-in-interest shall become

the owner of that Economic Interest; or

 

(c) the Company, and/or one or more of the remaining Members and/or

any other Person(s) designated by the Managers shall purchase, and the Former

Member or the Former Member's successor-in-interest shall sell, the Former

Member's Interest upon the terms and conditions specified in Section 8.3.

 

8.3 TERMS OF TRANSFER.

 

(a) TRANSFEREE BOUND BY AGREEMENT. If all or any part of Member's

Membership Interest or Economic Interest has been Transferred to a transferee,

that transferee shall take and hold such Interest subject to this Agreement and

to all of the obligations and restrictions upon the Member and shall observe and

comply with this Agreement and with all such obligations and restrictions.

 

(b) NOTICE OF REPURCHASE EVENT. Upon the occurrence of a Membership

Termination Event, the Member affected (the "Transferring Interest Holder")

shall promptly give notice (the "Notice") to the Company and to all Eligible

Members, stating when the Membership Termination Event occurred, the reason

therefor, if applicable, the percentage of the Membership Interest or Economic

Interest so affected, and the name, address and capacity of the transferee, if a

Transfer has occurred. If no such Notice is given within ten (10) days of the

occurrence of the Membership Termination Event, any Eligible Member may

institute the purchase proceedings by giving a Notice to the Company, the other

Eligible Members and the Transferring Interest Holder. For purposes of the

remainder of this Section 8.3, the term "Affected Interest" shall mean the

Membership Interest or Economic Interest which the Transferring Interest Holder

is required to sell to the Company and the Eligible Members pursuant to Section

8.2(c) above.

 

(c) OPTION TO PURCHASE. Upon receipt of any Notice, the Company

shall have the right and option, for a period ending thirty (30) calendar days

following the determination of the purchase price of the Affected Interest, to

elect to purchase all (but not less than all) of the Affected Interest at the

price and upon the terms provided below in this Section 8.3, and the Eligible

Members, pro rata in accordance with the ratio of their Economic Interests,

shall then have the right and option, for a period of twenty (20) days

thereafter, to elect to purchase all or any part of the Affected Interest not

elected to be purchased by the Company upon the same terms and conditions as

exist in favor of the Company. If all Eligible Members do not elect to purchase

the entire balance of the Affected Interest, then the Eligible Members electing

to purchase shall have the right and option, for a period of ten (10) days

thereafter and pro rata in accordance with the ratio of their Economic

Interests, to purchase the balance of the Affected Interest available for

purchase. If the Company and the Eligible Members do not elect to purchase all

of the Affected Interest, the Transferring Interest Holder shall retain all of

the Affected Interest subject to all of the terms of this Agreement.

 

 

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(d) PURCHASE PRICE.

 

(i) BY AGREEMENT. Upon the Company's receipt of the Notice,

the Transferring Interest Holder and the Company (acting through the Managers)

shall promptly attempt to agree upon a purchase price for the Affected Interest.

 

(ii) BY APPRAISAL IF NO AGREEMENT. If the Company and the

Transferring Interest Holder are unable to agree upon a purchase price within

thirty (30) calendar days following the Company's receipt of the Notice, they

shall appoint an appraiser as mutually agreed by the parties to value the Fair

Market Value of the Affected Interest as of the date the Membership Termination

Event occurred. The determination of the purchase price in the by the appraiser

shall be conclusive for all purposes and upon all parties.

 

 

The expenses of appraisal shall be borne equally by the Company and

the Transferring Interest Holder. The portion of the compensation and fees

allocated to the Company shall be apportioned, as among the Company and any

Members electing to purchase the Affected Interest, on a pro rata basis to the

amount of the Affected Interest purchased by the Company and each such Member,

respectively.

 

(iii) QUALIFICATIONS OF APPRAISER. The appraiser selected by

the parties shall be reasonably experienced in valuing interests in businesses

similar to the business then conducted by the Company.

 

(e) PAYMENT OF PURCHASE PRICE.

 

(i) PAYMENT. Except as provided below, the purchase price for

the Affected Interest shall be payable at the option of the Company and each

purchasing Member, severally, either entirely in cash, or partly in cash and

partly by delivery of a promissory note (in which latter case, at least

twenty-five percent (25%) of the purchase price for the Affected Interest shall

be payable in cash at closing with the remainder payable by delivery of a

promissory note). Each promissory note hereunder ("Note") shall be in the form

of a secured promissory note, payable as provided in clause (ii) below.

 

(ii) PROMISSORY NOTES. Each Note shall be payable in four(4)

equal quarterly principal installments over one year, with fixed interest at

Prime. Interest shall be paid quarterly in addition to principal. Each Note

shall provide that the maker of the Note shall have the right to prepay all or

any part of the principal balance on the Note without penalty or premium and

that any sums paid in any period in excess of the regular installment for that

period shall be applied against installments thereafter falling due, in the

inverse order of their maturity or against all of the remaining installments

equally, at the option of the holder of the Note. Each Note shall also provide

that in case of default in the payment of any installment when due, the entire

principal balance then remaining unpaid shall become immediately due and payable

at the option of the holder, and shall provide for the payment by the maker of

reasonable attorneys' fees to the holder in the event suit is commenced because

of any default. Each Note executed by a Member shall be secured by a security

interest in that part of the Affected Interest purchased by that Member. Each

Note executed by the Company shall be secured by a security interest in all of

the property of the Company. So long as no default occurs in the making of

payments on any

 

 

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Note, the Company and/or the purchasing Members shall have the right to

receive all distributions of Distributable Cash and other Distributions and

all allocations of Net Profits, Net Losses and Tax Credits attributable

thereto. However, upon default by the Company or a purchasing Member in the

payment of its Note, and if that default continues for a period of thirty

(30) days after notice thereof to the Company and/or the purchasing Member,

the Transferring Interest Holder shall thereupon have, in addition to any

other rights or remedies it may have by reason of the default, the right to

receive the distributions of Distributable Cash and other Distributions

attributable thereto (but not the allocations of Net Profits, Net Losses and

Tax Credits attributable thereto, which shall continue to vest until

foreclosure in the legal owners of the Membership Interests or Economic

Interest(s) so serving as security). Any Distributions so received shall be

applied to, and shall reduce, the amount of principal and interest owing on

the Note.

 

(iii) SUBORDINATION OF NOTES. Each Note issued by the Company

shall be subordinated in right of payment to the payment of all Senior Debt (as

defined below) upon such terms and conditions as the holders of the Senior Debt

may determine, and each such Note shall contain subordination provisions which

are approved as to form and substance by all holders of the Senior Debt. For

these purposes "Senior Debt" means financing provided by one or more

institutional or private lenders to fund the Company's business operations. The

parties acknowledge that the Company's ability to make payments under

outstanding Notes may be limited from time to time by any such subordination

provisions, by provisions of applicable law and by provisions of the Articles.

If, as a result of these limitations, the Company is at any particular time able

to make payments under some but not all of its outstanding Notes, it shall

allocate the payments which it is able to make among the Notes on a strict

"first issued, first paid" basis. Each Note issued by the Company shall provide

that no payments of principal or interest may be made thereon at any time that

the Company is in arrears in the payment of principal or interest on any Note

previously issued by the Company.

 

(f) CONSUMMATION OF SALE. Unless the parties involved mutually agree

otherwise, delivery to the Company and/or the purchasing Members of the Affected

Interest to be sold hereunder and payment of the purchase price therefor shall

take place at a closing (the "Closing") to be held at the principal office of

the Company within thirty (30) calendar days following the termination of the

last applicable option period. At the Closing, the Transferring Interest Holder

shall deliver to the Company and/or the purchasing Members a bill of sale and

assignment effecting the transfer of the Affected Interest to be sold, in form

and substance satisfactory to the Company and/or the purchasing Members, and

shall deliver, in addition, any other documents reasonably requested by the

Company and/or the purchasing Members to effectuate the purposes of this

Agreement.

 

ARTICLE IX

 

ACCOUNTING, RECORDS, REPORTING BY MEMBERS

 

9.1 BOOKS AND RECORDS. The books and records of the Company shall be

kept, and the financial position and the results of its operations recorded, in

accordance with the method selected by the Managers. The books and records of

the Company shall reflect all the Company

 

 

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transactions and shall be appropriate and adequate for the Company's

business. The Company shall maintain all of the following at its principal

office:

 

(a) a current list of the full name and last known business or

residence address of each Member and Economic Interest Holder set forth in

alphabetical order, together with the Capital Contributions, Capital Account,

Voting Interest and Economic Interest of each Member and Economic Interest

Holder;

 

(b) a current list of the full name and business or residence

address of each Manager;

 

(c) copies of the Certificate of Formation and all amendments

thereto, together with executed copies of any powers of attorney pursuant to

which the Certificate of Formation or any amendments thereto have been executed;

 

(d) copies of the Company's federal, state and local income tax or

information returns and reports, if any, for the six most recent taxable years;

 

(e) copies of this Agreement and any and all amendments thereto,

together with executed copies of any powers of attorney pursuant to which this

Agreement or any amendments thereto have been executed;

 

(f) copies of the financial statements of the Company, if any, for

the six most recent Fiscal Years;

 

(g) the Company's books and records pertaining to the internal

affairs of the Company for at least the current and past four Fiscal Years; and

 

(h) copies of all written consents approving actions taken by the

Members without a meeting pursuant to Section 4.4.

 

9.2 REPORTS; ANNUAL STATEMENTS.

 

(a) GOVERNMENTAL REPORTS. The Managers shall cause to be filed all

documents and reports required to be filed with any governmental agency in

accordance with the Act.

 

(b) FINANCIAL REPORTS. The Managers shall cause to be sent to each

Member of the Company (a) not later than one hundred twenty (120) days after the

close of each Fiscal Year of the Company, the Company's unaudited financial

statements for that Fiscal Year, including a balance sheet as of the end of that

Fiscal Year and an income statement and statement of changes in financial

position for that Fiscal Year, accompanied by the report thereon of the

independent accountants engaged by the Company, and (b) within thirty (30) days

after the end of each of the first three (3) fiscal quarters of each Fiscal Year

of the Company, the Company's unaudited financial statements for such fiscal

quarter, including a balance sheet as of the end of that fiscal quarter and an

income statement and statement of changes in financial position for such fiscal

quarter.

 

 

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(c) TAX REPORTS. The Managers shall cause to be prepared at least

annually, at Company expense, information necessary for the preparation of

the Members' and Economic Interest Holders' federal and state income tax

returns. The Managers shall send or cause to be sent to each Member and

Economic Interest Holder within ninety (90) days after the end of each

taxable year such information as is necessary to complete federal and state

income tax or information returns.

 

9.3 BANK ACCOUNTS; INVESTED FUNDS. All funds of the Company shall be

deposited in such account or accounts of the Company as may be determined by

the Managers and shall not be commingled with the funds of any other Person.

All withdrawals therefrom shall be made upon checks signed by such persons

and in such manner as the Managers may determine. Temporary surplus funds of

the Company may be invested in commercial paper, time deposits, short-term

government obligations or other investments determined by the Managers.

 

9.4 TAX MATTERS FOR THE COMPANY HANDLED BY TAX MATTERS PARTNER. The

Managers shall from time to time cause the Company to make such tax elections

as they deem to be in the best interests of the Company and the Members. The

Tax Matters Partner shall represent the Company (at the Company's expense) in

connection with all administrative and/or judicial proceedings by the

Internal Revenue Service or any government authority involving any return of

the Company, and may expend the Company's funds for professional services and

costs associated therewith. Without limiting the powers which the Tax Matters

Partner may exercise, the Tax Matters Partner shall have the authority to do

any of the following: (a) enter into a settlement agreement with the Internal

Revenue Service which binds the Members, (b) file a petition as contemplated

in Section 6226(a) or 6228 of the Code, (c) intervene in any action as

contemplated in Section 6226(b)(5) of the Code, (d) file any request

contemplated in Section 6227(b) of the Code, or (e) enter into an agreement

extending the period of limitations as contemplated in Section 6229(b)(1)(B)

of the Code.

 

9.5 ACCOUNTING MATTERS. All decisions as to accounting matters shall

be made by the Managers.

 

9.6 CONFIDENTIALITY. All books, records, financial statements, tax

returns, budgets, business plans and projections of the Company, all other

Confidential Information and all of the terms and provisions of this

Agreement shall be held in confidence by the Managers, the Members and the

Economic Interest Holders and their respective Affiliates, subject to any

obligation to comply with (a) any applicable law, (b) any rule or regulation

of any legal authority or securities exchange, or (c) any subpoena or other

legal process to make information available to the Persons entitled thereto.

Such confidentiality shall be maintained to the same degree as each Manager,

Member or Economic Interest Holder maintains its own confidential information

and shall be maintained until such time, if any, as any such confidential

information either is, or becomes, published or a matter of public knowledge.

Without limiting the generality of the foregoing, no Member, Economic

Interest Holder or Manager shall, at any time (both during the period such

Person is a Member, Economic Interest Holder or Manager and thereafter),

cause, suffer or permit the Confidential Information to be used for the gain

or benefit of any party outside of the Company or for such Person's personal

gain or benefit outside the scope of such Person's relationship with the

Company.

 

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ARTICLE X

 

DISSOLUTION AND WINDING UP

 

10.1 DISSOLUTION. The Company shall be dissolved, its assets disposed

of and its affairs wound up upon the first to occur of the following:

 

(a) the vote of the Managers and Members holding at least

seventy-five percent (75%) of all Voting Interests;

 

(b) the occurrence of a Membership Termination Event as to the

last and only remaining Member, if the Managers and that Member's

successor-in-interest fail to consent to the continuation of the Company in

accordance with Section 8.1 within ninety (90) days after the occurrence of

that event;

 

(c) the sale of all or substantially all of the assets of the

Company; or

 

(d) the occurrence of an event which makes it unlawful for the

business of the Company to be continued.

 

10.2 DATE OF DISSOLUTION. Dissolution of the Company shall be

effective on the day on which the event occurs giving rise to the

dissolution, but the Company shall not terminate until the assets of the

Company have been liquidated and distributed as provided herein.

Notwithstanding the dissolution of the Company, prior to the termination of

the Company the business of the Company and the rights and obligations of the

Members and Economic Interest Holders, as such, shall continue to be governed

by this Agreement.

 

10.3 WINDING UP. Upon the occurrence of any event specified in Section

10.1, the Company shall continue solely for the purpose of winding up its

affairs in an orderly manner, liquidating its assets and satisfying the

claims of its creditors. The Managers shall be responsible for overseeing the

winding up and liquidation of the Company and shall cause the Company to (a)

sell or otherwise liquidate all of the Company's assets as promptly as

practicable, except to the extent the Managers determine to distribute any

assets to the Economic Interest Holders in kind, (b) allocate any Net Profits

or Net Losses resulting from such sales to the Economic Interest Holders'

Capital Accounts in accordance with this Agreement, (c) discharge or make

reasonable provision for all liabilities of the Company, including all

liabilities to the Managers, the Members and the Economic Interest Holders to

the extent permitted by law (other than liabilities for unpaid distributions

to Economic Interest Holders and former Economic Interest Holders under the

Act), and all costs relating to the dissolution, winding up, and liquidation

and distribution of assets, (d) establish such reserves as may be reasonably

necessary to provide for contingent liabilities of the Company (for purposes

of determining the Capital Accounts of the Economic Interest Holders, the

amounts of such reserves shall be deemed to be an expense of the Company),

(e) discharge or make reasonable provision for any remaining liabilities of

the Company to the Economic Interest Holders, other than on account of their

interests in Company capital or profits, and to the Managers, and (f)

distribute the remaining assets to the Economic Interest Holders in the

manner specified in Section 10.4.

 

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10.4 LIQUIDATING DISTRIBUTIONS TO ECONOMIC INTEREST HOLDERS. The

remaining assets of the Company shall promptly be distributed to the Economic

Interest Holders in accordance with Section 6.8, after taking into account

income and loss allocations for the Company's taxable year during which the

liquidation occurs.

 

10.5 DISTRIBUTIONS IN KIND. Any non-cash asset distributed to one or

more Economic Interest Holders shall first be valued at its Fair Market Value

to determine the Net Profit or Net Loss that would have resulted if that

asset had been sold for that value, the Net Profit or Net Loss shall then be

allocated pursuant to Article VI, and the Economic Interest Holders' Capital

Accounts shall be adjusted to reflect those allocations. The amount

distributed and charged to the Capital Account of each Economic Interest

Holder receiving an interest in the distributed asset shall be the Fair

Market Value of the interest (net of any liability secured by the asset that

the Member assumes or takes subject to). The Fair Market Value of that asset

shall be determined by the Managers.

 

10.6 PROVISION FOR DEBTS AND LIABILITIES. The payment of a debt or

liability, whether the whereabouts of the creditor is known or unknown, has

been adequately provided for if the payment has been provided for by either

of the following means:

 

(a) payment has been assumed or guaranteed in good faith by one

or more financially responsible Persons or by the United States government or

any agency thereof, and the provision, including the financial responsibility

of the Person, was determined in good faith and with reasonable care by the

Managers to be adequate at the time of any distribution of the assets

pursuant to this Section; or

 

(b) the amount of the debt or liability has been deposited as

provided in Title 12, Section 1197 of the Delaware Code.

 

This Section 10.6 shall not prescribe the exclusive means of

making adequate provision for debts and liabilities.

 

10.7 NO LIABILITY. Notwithstanding anything to the contrary in this

Agreement, upon a liquidation within the meaning of Section

1.704-1(b)(2)(ii)(g) of the Treasury Regulations, if any Economic Interest

Holder has a negative deficit Capital Account balance (after giving effect to

all contributions, distributions, allocations and other Capital Account

adjustments for all taxable years, including the year during which such

liquidation occurs), neither that Economic Interest Holder nor the Managers

shall have any obligation to make any contribution to the capital of the

Company, and the negative balance of that Economic Interest Holder's Capital

Account shall not be considered a debt owned by that Economic Interest Holder

or the Managers to the Company or to any other person for any purpose

whatsoever.

 

10.8 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION. Except as otherwise

specifically provided in this Agreement, each Economic Interest Holder shall

be entitled to look only to the assets of the Company for the return of that

Economic Interest Holder's positive Capital Account balance and shall have no

recourse for its Capital Contributions and/or share of Net Profits (upon

dissolution or otherwise) against the Managers or any other Economic Interest

Holder.

 

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10.9 CERTIFICATE OF CANCELLATION. Upon completion of the winding up of

the Company's affairs, the Managers shall file a Certificate of Cancellation

with the Delaware Secretary of State.

 

10.10 COMPENSATION FOR SERVICES. The Managers shall be entitled to

reasonable compensation from the Company for their services in winding up the

affairs of the Company.

 

ARTICLE XI

 

LIMITATION OF LIABILITY; STANDARD OF CARE; INDEMNIFICATION

 

11.1 LIMITATION OF LIABILITY. The debts, obligations and liabilities

of the Company, whether arising in contract, tort or otherwise, shall be

solely the debts, obligations and liabilities of the Company, and no Member,

Economic Interest Holder, Manager or officer of the Company shall be

obligated personally for any such debt, obligation or liability of the

Company solely by reason of being a Member, Economic Interest Holder, Manager

and/or officer.

 

11.2 STANDARD OF CARE. Neither the Managers nor any Member or officer

of the Company shall have any personal liability whatsoever to the Company or

to any Member, Economic Interest Holder or Affiliate of the Company or to any

Affiliate or constituent owner of any Member or Economic Interest Holder on

account of such Person's status as the Manager or as a Member or officer of

the Company or by reason of such Person's acts or omissions in connection

with the conduct of the business of the Company so long as such Person acts

in good faith for a purpose which the Person reasonably believes to be in, or

not opposed to, the best interests of the Company; provided, however, that

nothing contained herein shall protect any such Person against any liability

to which such Person would otherwise be subject by reason of (a) any act or

omission of such Person that involves actual fraud or willful misconduct or

(b) any transaction from which such Person derives any improper personal

benefit.

 

11.3 INDEMNIFICATION. The Company shall indemnify and hold harmless

any Person made, or threatened to be made, a party to an action or

proceeding, whether civil, criminal or investigative (a "proceeding"),

including an action by or in the right of the Company, by reason of the fact

that such Person was or is a Manager, a Member (including in the capacity of

the Tax Matters Partner) or an officer of the Company, an Affiliate of a

Manager, a Member or an officer of the Company, or an officer, director,

shareholder, partner, member, employee, manager or agent of any of the

foregoing, against all judgments, fines, amounts paid in settlement and

reasonable expenses (including investigation, accounting and attorneys' fees)

incurred as a result of such proceeding, or any appeal therein (and

including, without limitation, indemnification against active or passive

negligence, gross negligence or breach of duty) if such Person acted in good

faith, for a purpose which he reasonably believed to be in, or not opposed

to, the best interests of the Company and in criminal proceedings, in

addition, had no reasonable cause to believe that his conduct was unlawful.

The termination of any such civil or criminal proceeding by judgment,

settlement, conviction or upon a plea of nolo contendere, or its equivalent,

shall not in itself create a presumption that any such Person did not act in

good faith, for a purpose which he reasonably believed to be in, or not

opposed to, the best interests of the Company or that he had reasonable cause

to believe that his conduct was unlawful; provided only that no such Person

shall be indemnified or held harmless if and to the extent that the liability

sought to be

 

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indemnified or held harmless against results from (a) any act or omission of

such Person that involved actual fraud or willful misconduct or (b) any

transaction from which such Person derived improper personal benefit. The

Company's indemnification obligations hereunder shall survive the termination

of the Company. Each indemnified Person shall have a claim against the

property and assets of the Company for payment of any indemnity amounts from

time to time due hereunder, which amounts shall be paid or properly reserved

for prior to the making of distributions by the Company to the Members.

 

11.4 CONTRACT RIGHT; EXPENSES. The right to indemnification conferred

in this Article XI shall be a contract right and shall include the right to

require the Company to advance the expenses incurred by the indemnified

Person in defending any such proceeding in advance of its final disposition;

provided, however, that, if the Act so requires, the payment of such expenses

in advance of the final disposition of a proceeding shall be made only upon

receipt by the Company of an undertaking, by or on behalf of the indemnified

Person, to repay all amounts so advanced if it shall ultimately be determined

that such Person is not entitled to be indemnified under this Article XI or

otherwise.

 

11.5 INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Company may, to the

extent authorized from time to time by the Managers, grant rights to

indemnification and to advancement of expenses to any employee or agent of

the Company to the fullest extent of the provisions of Sections 11.3 and 11.4

with respect to the indemnification and advancement of expenses of the

Managers, the Members and/or the officers of the Company.

 

11.6 NONEXCLUSIVE RIGHT. The right to indemnification and the payment

of expenses incurred in defending a proceeding in advance of its final

disposition conferred in this Article XI shall not be exclusive of any other

right which any Person may have or hereafter acquire under any statute or

agreement, or under any insurance policy obtained for the benefit of the

Managers, the Members and/or the officers of the Company.

 

11.7 SEVERABILITY. If any provision of this Article XI is determined

to be unenforceable in whole or in part, such provision shall nonetheless be

enforced to the fullest extent permissible, it being the intent of this

Article XI to provide indemnification to all Persons eligible hereunder to

the fullest extent permitted under law.

 

11.8 INSURANCE. The Managers may cause the Company to purchase and

maintain insurance on behalf of any Person (including, without limitation,

the Managers or any Member or officer of the Company) who is or was an agent

of the Company against any liability asserted against that Person and

incurred by that Person in any such capacity or arising out of that Person's

status as an agent, whether or not the Company would have the power to

indemnify that Person against liability under the provisions of Sections 11.3

and 11.4 or under applicable law.

 

ARTICLE XII

 

REPRESENTATIONS OF THE MEMBERS

 

Each Member represents and warrants to the other Members and the

Company as follows:

 

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12.1 PREEXISTING RELATIONSHIP OR EXPERIENCE. (a) The Member has a

preexisting personal or business relationship with the Company or one or more

of its Managers, officers or control persons or (b) by reason of the Member's

business or financial experience, or by reason of the business or financial

experience of the Member's financial advisor who is unaffiliated with and who

is not compensated, directly or indirectly, by the Company or any Affiliate

or selling agent of the Company, the Member is capable of evaluating the

risks and merits of an investment in its Membership Interest and of

protecting the Member's own interests in connection with the investment.

 

12.2 ACCESS TO INFORMATION. The Member has had an opportunity to

review all documents, records and books pertaining to this investment and has

been given the opportunity to consult with counsel of his or her choice with

respect to all aspects of this investment and the Company's proposed business

activities. Such Member has personally met with the Managers and has been

provided with such information as may have been requested and has at all

times been given the opportunity to obtain additional information necessary

to verify the accuracy of the information received and the opportunity to ask

questions of and receive answers from the Managers concerning the terms and

conditions of the investment and the nature and prospects of the Company's

business.

 

12.3 ECONOMIC RISK. The Member is financially able to bear the

economic risk of an investment in its Membership Interest, including the

total loss thereof.

 

12.4 INVESTMENT INTENT. The Member is acquiring its Membership

Interest for investment purposes and for the Member's own account only and

not with a view to, or for sale in connection with, any distribution of all

or any part of its Membership Interest. Except for the partners or members of

the Member, no other Person will have any direct or indirect beneficial

interest in, or right to, its Membership Interest.

 

12.5 CONSULTATION WITH ATTORNEY. The Member has been advised to

consult with its own attorney regarding all legal and tax matters concerning

an investment in its Membership Interest and has done so to the extent it

considers necessary.

 

12.6 PURPOSE OF ENTITY. If the Member is a corporation, partnership,

limited liability company, trust or other entity, it was not organized for

the specific purpose of acquiring its Membership Interest.

 

12.7 RESIDENCY. The Member is a resident of the state of California.

 

12.8 NO ADVERTISING. The Member has not seen, received or been

solicited by any leaflet, public promotional meeting, newspaper or magazine

article or advertisement, radio or television advertisement or any other form

of advertising or general solicitation with respect to the sale of its

Membership Interest.

 

12.9 MEMBERSHIP INTEREST IS RESTRICTED SECURITY. The Member

understands that its Membership Interest, including the Economic Interest

constituting a part thereof, is a "restricted security" under the Securities

Act in that the Membership Interest will be acquired from the Company in a

transaction not involving a public offering, that its Membership Interest and

the Economic Interest constituting a part thereof may be resold without

registration under the

 

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Securities Act only in certain limited circumstances and that otherwise its

Membership Interest and such Economic Interest must be held indefinitely.

 

12.10 NO REGISTRATION OF MEMBERSHIP INTEREST. The Member acknowledges

that its Membership Interest has not been registered under the Securities Act

or qualified under any state securities law in reliance, in part, upon its

representations, warranties and agreements herein.

 

12.11 ORGANIZATION. The Member is duly organized and validly existing

under the laws of its jurisdiction of formation, with full corporate or

limited liability company power to carry on its business as now or proposed

to be conducted.

 

12.12 AUTHORITY. The Member has full power and authority to enter into

this Agreement and has taken all action required to authorize the execution,

delivery and performance of this Agreement.

 

12.13 ENFORCEABILITY. This Agreement constitutes the legal, valid and

binding obligation of the Member, enforceable against the Member in

accordance with its terms, except as the enforcement thereof may be limited

by bankruptcy, insolvency, reorganization, moratorium or similar laws

relating to or limiting creditors' rights generally and subject to the

availability of equitable remedies.

 

12.14 NO VIOLATION. None of the execution, delivery or performance by

the Member of this Agreement will: (a) violate any provision of the

Certificate of Incorporation, Certificate of Formation, bylaws, operating

agreement or other charter documents of the Member; (b) violate, or

constitute a default under any contract or agreement to which the Member or

any of its properties is subject or bound; or (c) violate any law or order to

which the Member or any of its properties is subject.

 

ARTICLE XIII

 

MISCELLANEOUS

 

13.1 LEGAL COUNSEL. The Members acknowledge that Loeb & Loeb LLP is

counsel to Onlinefilmsales with respect to this Agreement and the

transactions contemplated herein and that Loeb & Loeb LLP may in the future

represent the Company in connection with its business and affairs. The

Members further acknowledge that Katz, Golden & Sullivan, LLP has been

counsel to MediaChase and the Company and that Katz, Golden & Sullivan, LLP

may in the future represent the Company in connection with its business and

affairs. MediaChase hereby consents to Loeb & Loeb LLP's representation of

Onlinefilmsales with respect to this Agreement and the transactions

contemplated herein and also consents to Loeb & Loeb LLP's representation of

the Company in the future. Onlinefilmsales hereby consents to Katz, Golden &

Sullivan, LLP's representation of MediaChase and the Company with respect to

this Agreement and the transactions contemplated herein and also to its

representation of the Company in the future. Without limiting the generality

of the foregoing, MediaChase and Onlinefilmsales agree that Loeb & Loeb LLP

and Katz, Golden & Sullivan, LLP may, notwithstanding any past existing or

future representation of Onlinefilmsales or MediaChase, respectively, or any

information or experience obtained by Loeb & Loeb LLP or Katz, Golden &

Sullivan, LLP in any such

 

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representation, represent Onlinefilmsales or MediaChase and/or their

respective Affiliates, respectively, in connection with any future

litigation, reference or other proceeding or dispute which may arise from or

relate to this Agreement or the transactions contemplated herein, hereby

waiving any rights it may have to object to such representation under any and

all circumstances. Such consent is freely given by MediaChase and

Onlinefilmsales after full consideration of its consequences and after

consultation with independent legal counsel of its respective choice.

 

13.2 AMENDMENTS. No amendment to this Agreement may be made without

compliance with Section 5.3(g). All amendments to this Agreement must be in

writing.

 

13.3 OFFSET PRIVILEGE. The Company may offset against any monetary

obligation owing from the Company to any Member, Economic Interest Holder or

Manager any monetary obligation then owing from that Member, Economic

Interest Holder or Manager to the Company.

 

13.4 ARBITRATION.

 

(a) GENERAL. In the event of any dispute, claim or controversy

among the parties arising out of or relating to this Agreement or the

Certificate of Formation whether in contract, tort, equity or otherwise, and

whether relating to the meaning, interpretation, effect, validity,

performance or enforcement of this Agreement or the Certificate of Formation,

such dispute, claim or controversy shall be resolved by and through an

arbitration proceeding to be conducted under the auspices and the commercial

arbitration rules of the American Arbitration Association (or any like

organization successor thereto) at Los Angeles, California. The arbitrability

of the dispute, claim or controversy shall likewise be determined in the

arbitration. The arbitration proceeding shall be conducted in as expedited a

manner as is then permitted by the commercial arbitration rules (formal or

informal) of the American Arbitration Association. Both the foregoing

agreement of the parties to arbitrate any and all such disputes, claims and

controversies, and the results, determinations, findings, judgments and/or

awards rendered through any such arbitration shall be final and binding on

the parties and may be specifically enforced by legal proceedings in any

court of competent jurisdiction.

 

(b) GOVERNING LAW. The arbitrator(s) shall follow any applicable

federal law and Delaware state law (with respect to all matters of

substantive law) in rendering an award.

 

(c) COSTS OF ARBITRATION. The cost of the arbitration proceeding

and any proceeding in court to confirm or to vacate any arbitration award, as

applicable (including, without limitation, each party's attorneys' fees and

costs), shall be borne by the unsuccessful party or, at the discretion of the

arbitrator(s), may be prorated between the parties in such proportion as the

arbitrator(s) determine(s) to be equitable and shall be awarded as part of

the arbitrators' award.

 

13.5 REMEDIES CUMULATIVE. Except as otherwise provided herein, the

remedies under this Agreement are cumulative and shall not exclude any other

remedies to which any Person may be lawfully entitled.

 

13.6 NOTICES. Any notice to be given to the Company or any Member,

Economic Interest Holder or Manager in connection with this Agreement must be

in writing and will be deemed to have been given and received when delivered

to the address specified by the party to

 

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receive the notice by courier or other means of personal service, when

received if sent by facsimile, or three (3) days after deposit of the notice

by first class mail, postage prepaid, or certified mail, return receipt

requested. Any such notice must be given to the Company at its principal

place of business, and to any Member, Economic Interest Holder or Manager at

the address specified in Exhibit A. Any party may, at any time by giving five

(5) days' prior written notice to the other parties, designate any other

address as the new address to which notice must be given.

 

13.7 ATTORNEYS' FEES. Subject to the provisions of Section 13.4

requiring that disputes be submitted to arbitration, in the event that any

dispute between the Company and/or the Members or Economic Interest Holders

and/or the Managers should result in litigation, the prevailing party in that

dispute shall be entitled to recover from the other party all reasonable

fees, costs and expenses of enforcing any right of the prevailing party,

including without limitation, reasonable attorneys' fees and expenses.

 

13.8 GOVERNING LAW; JURISDICTION. The Agreement shall be governed by

and construed in accordance with the laws of the State of Delaware, without

regard to any conflicts of laws principles of the State of Delaware or any

other jurisdiction that would call for the application of the law of any

jurisdiction other than the State of Delaware. Subject to the requirement

that all disputes are to be submitted to arbitration pursuant to Section

13.4, each Member, Economic Interest Holder and Manager consents to the

exclusive jurisdiction of the federal courts sitting in Los Angeles,

California, in any action on a claim arising out of, under or in connection

with this Agreement or the transactions contemplated by this Agreement. Each

Member, Economic Interest Holder and Manager further agrees that personal

jurisdiction over it may be effected by service of process by registered or

certified mail addressed as provided in Section 13.6 and that when so made

shall be as if served upon it personally.

 

13.9 COMPLETE AGREEMENT. This Agreement, the Certificate of Formation,

the MediaChase Consulting Agreement and all of the other agreements or

instruments entered into by any Member in connection with the consummation of

the transactions contemplated hereby constitute the complete and exclusive

statement of agreement among the Members, Economic Interest Holders and

Managers with respect to their respective subject matters and supersede all

prior written and oral agreements or statements by and among the Members,

Economic Interest Holders and Managers. No representation, statement,

condition or warranty not contained in any such agreement shall be binding on

the Members, Economic Interest Holders or Managers or have any force or

effect whatsoever.

 

13.10 NO THIRD-PARTY RIGHTS. No Person other than a Member, an

Economic Interest Holder, a Manager or a Person entitled to indemnification

pursuant to Article XI shall have any legal or equitable right, remedy or

claim, or be a beneficiary, under or in respect of this Agreement.

 

13.11 BINDING EFFECT. Subject to the provisions of this Agreement

relating to Transferability, this Agreement shall be binding upon and inure

to the benefit of the Members, Economic Interest Holders and Managers and

their respective successors and assigns.

 

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13.12 SECTION HEADINGS. All Section headings are inserted only for

convenience of reference and are not to be considered in the interpretation

or construction of any provision of this Agreement.

 

13.13 INTERPRETATION. In the event any claim is made by any Member,

Economic Interest Holder or Manager relating to any conflict, omission or

ambiguity in this Agreement, no presumption or burden of proof or persuasion

shall be implied by virtue of the fact that this Agreement was prepared by or

at the request of a particular Member or Manager or that Member's, Economic

Interest Holder's or Manager's counsel.

 

13.14 SEVERABILITY. If any provision of this Agreement or the

application of that provision to any person or circumstance shall be held

invalid, the remainder of this Agreement or the application of that provision

to persons or circumstances other than those to which it is held invalid

shall not be affected.

 

13.15 MULTIPLE COUNTERPARTS. This Agreement may be executed in two or

more counterparts, each of which shall be deemed an original, but all of

which shall constitute one and the same instrument.

 

 

 

 

 

 

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IN WITNESS WHEREOF, all of the Members and the Managers of the

Company have executed this Agreement, effective as of the date first written

above.

 

MEMBERS: